Preamble

The House met at Half past Two o'Clock

PRAYERS

[Mr. SPEAKER in the Chair]

Oral Answers to Questions — ROADS

Hauliers, Cumberland (Nationalisation)

Lieut.-Colonel Dower: asked the Minister of Transport, in view of the uncertainty prevailing amongst road hauliers in Cumberland as to whether their businesses are to be wholly or partly nationalised under the Transport Bill, whether steps will be taken to make known to them in simplified form the effects of the Bill if passed into law.

The Minister of Transport (Mr. Barnes): As soon as the Bill was published copies were made available for inspection at the offices of the regional transport commissioners and district transport officers, and the staff of those offices were instructed to explain the provisions affecting them to road hauliers who inquired. I do not think that further steps are necessary at this stage.

Lieut.-Colonel Dower: While appreciating what the Minister has said, may I ask if he is not aware that there is a great deal of confusion in the country amongst road hauliers whether they will be nationalised or not; that that is impeding progress, development and improvement; and when the Bill becomes an Act will he consider publishing it in simplified form, so that they will know if they are in it, and if they are not, be able to get on with the work?

Mr. Barnes: I have no evidence that there is confusion—

Lieut.-Colonel Dower: Oh, yes.

Mr. Barnes: —but I think it is known 1947 generally throughout the industry that these facilities are there, and many people have taken advantage of them. I will take the second part of the supplementary question into consideration later.

Dartford—Purfleet Tunnel (Construction)

Mr. Solley: asked the Minister of Transport when it is proposed to start work on the Dartford—Purfleet tunnel.

Mr. Barnes: Tenders are about to be invited for the construction of this tunnel, but until they have been received and examined I am unable to say when the work will be begun.

Mr. Solley: Will my right hon. Friend bear in mind that on 6th May of last year he stated that this project would come within the first two years of his Io-year transport plan; that a year has already gone by; and does he think that this project will be completed within the remaining year of the two years he had in mind?

Mr. Barnes: It certainly will not be completed within the two years' period, but this is a rather substantial undertaking. Of course, I am hoping that I shall be able to start within the two years, but I cannot give any definite undertaking.

Mr. Solley: Could my right hon. Friend say that this project will be given every priority, having regard to its great industrial importance in the Purfleet area?

Parking (Side Streets)

Vice-Admiral Taylor: asked the Minister of Transport if he will have those side streets where motor cars are permitted to park suitably marked, so as to assist the private motorist in carrying out the law.

Mr. Barnes: Authorised parking places on public highways are indicated by a standard sign. Elsewhere, no person in charge of a motor vehicle should leave it standing on the highway if it is likely to cause unnecessary obstruction.

Vice-Admiral Taylor: What is the interpretation of "a highway"? It is clearly laid down where one may not park, but it is not laid down where motorists may


park off main streets. It is most necessary that there should be somewhere to park?

Mr. Barnes: Throughout London generally, the "free parking" sign is an official indication of a parking place. Motorists have been inclined to park all over the place.

Vice-Admiral Taylor: Is it not a fact that motorists are permitted to park in certain side streets within 40 feet of the main road?

Mr. Barnes: No, Sir. There has been a general inclination to park cars anywhere on the highway, and that is why these restrictions are being tried out at the present moment.

Mr. W. J. Brown: Would it be reasonable to suppose that we are permitted to park cars except where prohibited from parking cars?

Mr. Godfrey Nicholson: Does the Minister give official approval and encouragement to the system of parking cars on one side of the street on even dates and on the other on odd dates? Certain local authorities have adopted this system but others have not. Has the Minister laid down any rule in regard to this system?

Mr. Barnes: No hard and fast rule has been laid down, but co-operation is taking place with local authorities to develop a system of that character.

Mr. Nicholson: Will the Minister go so far as to say that he wishes this system to be encouraged and adopted more widely?

Mr. Barnes: I certainly think it is an improvement.

Vice-Admiral Taylor: Will the Minister consider allowing cars to park in very broad streets, such as Oxford Street, which would not inconvenience anyone in any way at all?

Maintenance, Lindsey (Reduced Grant)

Commander Maitland: asked the Minister of Transport what is the amount of the cut in the Exchequer grant towards the maintenance of roads in the area of the Lindsey County Council; and what percentage of the original proposed grant this represents.

Mr. Barnes: The grant will be less by about £10,000, or 4 per cent., than if the estimates of the county council had been accepted in full.

Commander Maitland: Can the right hon. Gentleman hold out any hope that this grant will be paid back to the county council?

Mr. Barnes: Not paid back—but consultations are taking place between my divisional road engineer and the county surveyor; I cannot say whether it will lead to any modification in this case.

Oral Answers to Questions — RAILWAYS

King's Cross—Edinburgh

Lord John Hope: asked the Minister of Transport (1) if, in the interests of the travelling public he will reconsider his decision to suspend the running of the 1 a.m. train from King's Cross to Edinburgh;
(2) if he is aware of the inconvenience that will be caused to the travelling public by the withdrawal of the 1 a.m. train from King's Cross to Edinburgh; and whether he will arrange either for one of the night trains to Edinburgh to leave King's Cross at 11 p.m. or for the 11.30 p.m. train from King's Cross to Newcastel to run on to Edinburgh.

Mr. Barnes: The withdrawal of this train is part of the 10 per cent. reduction in services this summer. I am informed that the 11 30 p.m. train to Newcastle is already fully loaded and could not take extra coaches for Edinburgh passengers, and that if tilt sleeper train for Edinburgh were to leave at 11 p.m., arrivals at certain important destinations in Scotland would be from two to five hours later owing to re-timing difficulties.

Lord John Hope: Does the Minister realise that he could scarcely have taken off a train which is wanted more, not only by members of the public, but also by Scottish Members of Parliament; and in view of that fact will he not reconsider this decision? This is a most important train, and it would make a great deal of difference to a lot of people if it could be put on again.

Mr. Barnes: I am always ready to look into matters referred to in the House, but on this question affecting the 10 per cent. reduction one must be guided, on the


whole, by the practical experience of the railway administration.

Mr. Stephen: Could the right hon. Gentleman say whether all Scottish interests were consulted before this decision was made?

Mr. Barnes: No, Sir. I do not think it would be practicable to discuss it with all the interests, over the whole of the railway system, affected by any particular train.

Lieut.-Commander Clark Hutchison: Would the right hon. Gentleman undertake to restore this train in the autumn when the 10 per cent. cut ends?

Mr. Barnes: Of course, at the moment it is only for the summer period, to assist in the restocking of coal. I have no reason to anticipate that it will continue beyond that period, but I will bear that point in mind.

Sir William Darling: Would the Minister also bear in mind that a 10 per cent. cut on the Scottish system is a much more severe one than a 10 per cent. cut on the English system?

Mr. Barnes: I, of course, always appreciate the special need of Scotland, and never overlook it.

Sir W. Darling: This is a special disadvantage.

Freight Trains (Derby Day)

Mr. George Wallace: asked the Minister of Transport how many freight trains were cancelled on Saturday, 7th June, in order that additional passenger trains might be provided for passengers attending Epsom races on Derby day.

Mr. Barnes: None, Sir.

Elham Valley Line (Closing)

Mr. Baker White: asked the Minister of Transport if he is aware that it has been announced that the Elham Valley line of the S.R. is to be closed to both goods and passenger traffic as from 16th June; that this closing down will cause great hardship to farmers, traders and the public in general; and if he will make a statement.

Mr. Barnes: I am informed that the Elham Valley line will be officially closed to passenger and goods traffic as from

today. The number of passengers using the line averaged only about a dozen a day in each direction, and the district is well covered by bus services. Parcels and "smalls" traffic can be delivered from Canterbury and Shorncliffe stations. Thu, railway company will continue to provide facilities on the branch for dealing with the small quantity of full truck load goods traffic until satisfactory alternative arrangements have been made.

Mr. White: Will the Minister represent to the railway company that the cutting off of present supplies of coal and agricultural supplies will cause the greatest inconvenience over a considerable area?

Mr. Barnes: I am informed that only six wagons a day come in and only one wagon a day goes out on this particular line, but in any case I have indicated that the company are going to see that that continues until other arrangements are made.

Oral Answers to Questions — SHIPPING

Life-Saving Equipment

Colonel J. R. H. Hutchison: asked the Minister of Transport whether he is satisfied with all the tests made on the Victory-type lifejacket.

Mr. Barnes: Yes, Sir. This lifejacket was, of course, fully tested before it was permitted to be used on merchant ships, and further tests recently carried out have confirmed that it is very efficient.

Colonel Hutchison: Is the right hon. Gentleman aware that specialists, the Norwegian Government, and the evidence arising out of the loss of the "Samwater" all throw considerable doubt upon the efficacy of this lifejacket, which it is alleged has a tendency to raise the heels and submerge the head? Does he not think that it is a rather unsatisfactory posture with which to face the future?

Mr. Barnes: On more than one occasion one has been confronted with a difference of opinion among the experts, but the majority of experts on this occasion appear to be satisfied with the tests, which have been thorough, and that the equipment is efficient.

Mr. E. P. Smith: Is the right hon. Gentleman aware that we are all very dissatisfied with the Victory-type strait-jacket?

Colonel Hutchison: Will the right hon. Gentleman say what will be the position if the life of a Norwegian is lost as a result of this jacket, in view of the fact that the Norwegian Government refuse to accept it as being satisfactory?

Mr. Barnes: I could not say what the attitude would be.

Colonel Hutchison: In view of the unsatisfactory nature of the reply, I beg to give notice that I shall raise the matter on the Adjournment.

Mr. Ralph Morley: asked the Minister of Transport if he will consider issuing regulations to compel all British ships to carry breeches-buoy apparatus for saving life.

Mr. Barnes: No: Sir, the breeches-buoy must be worked from the shore, but all sea-going ships of 80 tons gross and over, and all fishing boats of 50 feet or more in length are required by the Merchant Shipping (Life Saving Appliances) Rules to carry an approved type of line throwing appliance.

Sailings (Northern Ireland)

Sir Ronald Ross: asked the Minister of Transport whether he is aware that large numbers of Ulster people, resident in Great Britain, are at present unable to secure bookings to Northern Ireland for the bank holiday period of 12th July; and whether he will authorise sufficient additional sailings to accommodate those who wish to travel on this occasion.

Mr. Barnes: I understand that, except on 5th July, sailing tickets for Northern Ireland are still available on the sailing dates before 12th July by one or other of the routes. The London Midland and Scottish Railway have already provided for additional sailings for the Belfast holiday, and there is no additional tonnage available to augment sailings further.

Sir R. Ross: Are additional sailings available on this bank holiday on the same scale as for other bank holidays?

Mr. Barnes: I could not say "Yes" or "No" to that question, but I will look into the point.

Mr. Hector Hughes: Is the Minister aware that the congestion is contributed to by people desiring to go to Eire by this indirect route? Will he take some steps to obviate the congestion between Holyhead and Dun Laoghaire?

Mr. Barnes: It is rather difficult for me to tell people which route they should use.

Oral Answers to Questions — MINISTRY OF SUPPLY

Reconditioned Motor Cars (B.E.A.C.)

Mr. William Shepherd: asked the Minister of Supply if he is aware that B.E.A.C. have indicated their intention to sell reconditioned ex-Service motor cars to their employees; and what steps he is taking to see that such vehicles are not supplied to B.E.A.C. until all the priority demands of disabled ex-Service men and women are satisfied.

The Minister of Supply (Mr. John Wilmot): No vehicles are being supplied to B.E.A.C. for resale to their employees.

Mr. Shepherd: Is it not true to say that these vehicles are being supplied to B.E.A.C. for use by the corporation, and if so, will the Minister give an undertaking that no such vehicles will be supplied in future until the needs of disabled ex-Service men have been met?

Mr. Wilmot: That is quite a different question. Government Corporations and Departments obviously have a claim on certain vehicles, but these are usually of a different type from those required by ex-Service men.

Mr. Shepherd: Why should not disabled ex-Service men get these vehicles before these octopus corporations?

Iron and Steel Order (Amendments)

Mr. Boyd-Carpenter: asked the Minister of Supply how many amendments have now been effected in the Control of Iron and Steel (No. 46) Order, 1945, S.R. & O., 1945, No. 1660; and when it is his intention to introduce a consolidating Order.

Mr. Wilmot: There have been 10 amending orders. A consolidating order is now being drafted, but I cannot yet say when it will be ready.

Messrs. Thorium, Limited (Acquisition)

Major Bruce: asked the Minister of Supply whether he will make a statement concerning the acquisition by His Majesty's Government of the business of


Messrs. Thorium, Limited; whether he will publish the terms; and whether he will state the annual amount of the management fee with details of the managerial functions performed.

Mr. Wilmot: The business and premises of Thorium, Ltd., at Amersham, have been acquired on the basis of agreed valuations of the freehold property, equipment, stock-in-trade and goodwill. The company is responsible, as my agent and under my direction, for running the Radiochemical Centre for the processing, packing and distribution of natural and artificial radioactive substances required for medical, scientific and industrial purposes. It would be contrary to the usual practice to disclose either the terms of the acquisition or the management fee.

Atomic Energy (Licences)

Major Bruce: asked the Minister of, Supply the names of persons and bodies to whom licences have been issued under Section 10 (1) of the Atomic Energy Act, 1946, and the number and character of such licences.

Mr. Wilmot: No order has yet been made under this Subsection and, therefore, the question of issuing licences does not arise.

Bicycles (Spare Parts)

Mr. Bossom: asked the Minister of Supply if he is making any provision that will permit the indispensable bicycle spare parts, now required, being made, and the proposed cuts in raw materials essential for these parts being revised.

Mr. Wilmot: I fully appreciate the importance of the bicycle industry, especially in the export field, and the industry is receiving and will continue to receive all the steel that the supply position allows.

Mr. Bossom: Does the Minister realise that this Question does not refer to exports, but to people in this country who want to go to and from their work? Is he aware that many thousands of people cannot get their bicycles repaired, and will he do something about it?

Mr. Wilmot: I am well aware of that, but there is a great shortage of steel and there are large numbers of surplus bicycles coming on the market in disposal sales.

Mr. Bossom: Is the right hon. Gentleman aware that men do not want new bicycles, but spare parts? What is he going to do about it?

Mr. Wilmot: The matter is being kept fully in mind.

Mr. Bossom: In view of the unsatisfactory nature of the reply, I beg to give notice that I shall raise this matter on the Adjournment at the earliest opportunity.

Civil Aircraft Designs

Mr. Crawley: asked the Minister of Supply to what extent he is responsible for specifying forward designs of aircraft for British civil air lines; and what steps are taken to ensure that the user is fully consulted at every stage.

Mr. Wilmot: The Airways Corporations are primarily responsible for specifying future requirements of civil aircraft. The requirements are agreed with all interested parties, including the Ministry of Supply, and I am satisfied that my Department is fully consulted at all stages in the development of this aircraft.

Mr. Geoffrey Cooper: asked the Minister of Supply if he will make a statement with regard to specifications for civil aviation designs submitted to manufacturers which aim to copy the four-engine Lockheed Constellation with Bristol Centaurus engines; how many aircraft of this type it is proposed to order from the constructors; and by what date it is expected that such aircraft will be available for service on our airline routes.

Mr. Wilmot: I assume my hon. Friend is referring to the requirement which was received some time ago from the British Overseas Airways Corporation for a new medium range aircraft for use on the Empire routes. Tender designs prepared by various aircraft firms are now being examined, and until this examination is complete it is not possible to make any statement.

Mr. Cooper: Can my right hon. Friend say if it is intended to use American designs? If so, is it not likely that the new designs produced by this country will have superseded those American designs by the time they are ready for the routes?

Mr. Wilmot: I think this will be found to be a quite advanced design.

Mr. Cooper: Will my right hon. Friend place the utmost stress on our own constructors producing the most modern designs at the earliest possible moment?

Mr. Wilmot: Most certainly.

Vehicles, Storage Sites

Mr. Cooper: asked the Minister of Supply, how many motor disposal parks there are under his Department; who is responsible at these parks for seeing that the vehicles are looked after to prevent unnecessary deterioration; and how many vehicles at the Dorchester-on-Thames motor park were found with cracked cylinder blocks, due to exposure during the winter, through failure to drain the radiators and water jackets.

Mr. Wilmot: Six sites are at present used for the storage of vehicles. Standing instructions provide for the emptying of the cooling systems on arrival and vehicles are sold as quickly as possible to prevent deterioration, but owing to the shortage of labour and the number of vehicles involved, we cannot carry out repair and maintenance work on the sites. It is not possible to say whether any vehicles at Dorchester-on-Thames had cracked cylinders due to exposure, but the number of complaints received from all sources has been negligible.

Mr. Cooper: In cases which come to my right hon. Friend's attention, can he give an assurance that if there is neglect damages will be recovered from the contractors concerned, or that disciplinary action will be taken if any member of his staff is concerned?

Mr. Wilmot: I should have to look into a particular case.

Mr. Scollan: How does my right hon. Friend expect any complaints to come to him about these motor cars and their condition if nobody is allowed to see them?

Surplus Stores, India and Egypt

Mr. Cooper: asked the Minister of Supply, what is the total value of Government surplus stores in India and Egypt, shown separately; and what are the arrangements for their disposal.

Mr. Wilmot: All surplus stores in India were transferred on 1st April to the Government of India who are responsible or their disposal; the price to be paid for

them has not yet been fixed. As regards Egypt, substantial surplus stocks have yet to be disposed of, but it is not possible to give an estimate of their value. Disposal is carried out by my Department's Disposal Mission. Stores in short supply in this country are returned here, and the remainder are sold locally, mainly by auction or tender.

Mr. Cooper: Will my right hon. Friend use his best endeavours to get a rather better bargain for this country for these surplus stores than was the case of those disposed of in Italy and Greece?

Mr. Wilmot: We shall get the best bargain we can.

Mr. J. Langford-Holt: Is it not a trifle unorthodox to transfer wholesale large quantities of goods without deciding beforehand how much is wanted for them?

Mr. Wilmot: In some cases, this is the best method of disposal.

Woolwich Arsenal (Plant and Labour)

Mr. Bramall: asked the Minister of Supply, whether he will take steps without delay to remove the present disquiet in Woolwich Arsenal at the failure to use the plant available there to manufacture machinery and other essentials in short supply, and the consequent waste of both plant and labour.

Mr. Wilmot: The matter has been considered by the Ministry of Supply Joint Industrial Council, and has been referred to the Central Production Committee for further consideration.

Mr. Bramall: Would my right hon. Friend bear in mind that there is considerable disturbance of mind among the employees at Woolwich Arsenal when they are called upon to "work or want" and at the same time see the resources of their workplace not being fully used?

Proposed Atomic Power Station, Drigg

Mr. Henry Strauss: asked the Minister of Supply if he will assure the House that, before reaching any decision on the proposal to establish an atomic power station at Drigg, Cumberland, he will give full weight to the statements regarding a temporary factory in that place


which were made by his predecessor in 1939; whether he is aware of the objections to the use of this site on the seaboard of a national park for this purpose; and if he will give an undertaking that he will not proceed with the proposal without the consent and approval of the Minister of Town and Country Planning.

Mr. Wilmot: Yes, Sir.

M.A.P. Bungalows, Huyton (Rents)

Mr. Christopher Shawcross: asked the Minister of Supply whether he is aware that the tenants of the M.A.P. bungalows at Page Moss, Huyton, are threatening to strike against their rents which they regard as extortionate; what steps he is taking to meet their grievances; and if he will receive a deputation.

Mr. Wilmot: This matter is at present under consideration. I am fully aware of the position, and I do not think it necessary for me to receive a deputation.

Mr. Shawcross: While thanking my right hon. Friend for his reply, may I ask him whether he is not also aware that all the M.A.P. tenants in my constituency are in a similar position? Will he take steps to put all on the same basis?

Mr. Wilmot: We are doing our best.

Agricultural Tools (Supplies)

Lieut.-Colonel Lipton: asked the Minister of Supply whether he will take steps to remedy the shortage of potato forks and other agricultural tools, at present unobtainable by cultivators of allotments and smallholdings.

Mr. Wilmot: Supplies are limited by the lack of skilled labour in the industry and by the shortage of steel, and I am afraid there is no prospect of any immediate improvement. I am, however, very ready to help by asking manufacturers to distribute increased supplies to areas where a particularly acute shortage is brought to my notice.

Lieut.-Colonel Lipton: While thanking my right hon. Friend for his reply, may I ask him whether he is aware that both in London and areas outside I have been trying for months, without success, to buy a potato fork? Will he tell me where I can get one?

Air-Commodore Harvey: Will the Minister give an undertaking that while these implements are required at home they will not be exported?

Wire Rope (Colliery Needs)

Mr. Douglas Marshall: asked the Minister of Supply if he is aware of the acute shortage of wire rope; that wire drawers are in great difficulties for lack of wire rods; if he is aware that insufficient supplies of colliery ropes are hindering the National Coal Board in its production of coal; and what action he proposes to take.

Mr. Wilmot: Production is 20 per cent. more than in 1938, but is still insufficient to meet the greatly increased demands. Expansion of production is dependent on an increase in the supplies of steel, particularly in imported semi-finished material. We are doing all we can to improve the position, and the needs of collieries have been given special priority.

Mr. Marshall: If the production of steel is dependent on coal, and the supply of coal is dependent on getting these ropes, will the Minister say what he intends to do about it?

Mr. Walkden: In view of the tact that Germany was a fairly good source of supply before the war for this type of wire, would my right hon. Friend's Department, in collaboration with other Departments, see that we get a fair share of the supplies which may be available in Germany now?

Mr. Wilmot: We are doing all we can to get what there is.

Depot, Tewkesbury (Contracting Firms)

Mr. Parkin: asked the Minister of Supply how many firms contracting at his Depot No. 121 at Aston Cross, Tewkesbury, are on a cost-plus basis; and if he will inquire into the case of at least one contracting firm who have employees at this depot unnecessary lengths of time without any work to do.

Mr. Wilmot: Only one contractor is employed by my Department at this Depot, and he is paid a fixed management fee. I am satisfied that the work is properly supervised, and that time is not being wasted.

German Chemical Industry (Control)

Mr. Chetwynd: asked the Minister of Supply if he has considered the B.I.O.S. Final Report, No. 1007, Instrumentation and Control in the German Chemical Industry; and what action he proposes taking to implement the recommendations of this Report.

Mr. Wilmot: Yes, Sir. The recommendations are now being examined in detail with the industry.

Motor Industry (Steel Allocation)

Mr. Edelman: asked the Minister of Supply whether he intends to maintain the present allocation of steel to the motor industry during the third and fourth quarters of 1947.

Mr. Wilmot: Yes, Sir. I hope to be able to maintain the present allocation during the third quarter; it may indeed be possible to improve the allocation for the fourth quarter.

Mr. Edelman: Will my right hon. Friend confirm that he will make available sufficient steel to maintain full production and employment until the end of the year?

Mr. Wilmot: That is going a bit further than I said. We shall do our best to maintain as high an allocation as is consistent with the needs of other requirements.

Sir Patrick Hannon: Is the Minister alive to the embarrassment which prevails throughout the industry in Coventry and Birmingham, owing to the restricted allocation of steel? Can he do anything to improve the situation?

Mr. Wilmot: We are very much alive to it, and the need for steel in other industries. We are doing our best to make it go all round.

Mr. Shawcross: Will my right hon. Friend continue to do everything in his power to assist those who will use this steel to produce models suitable for export?

Oral Answers to Questions — MINISTRY OF WORKS

Requisitioned Properties (Rents)

Mr. Boyd-Carpenter: asked the Minister of Works whether requisition

rents fixed in accordance with 1939 values are still being paid by his Department in respect of properties held by it on requisition; and in respect of what percentage of the total property so held by his Department are rents so fixed now paid.

The Minister of Works (Mr. Key): The compensation rentals being paid correspond with few exceptions to the 1939 value.

Cement

Sir Waldron Smithers: asked the Minister of Works if he will give a list of undertakings in order of priority for receiving cement allocations.

Mr. Key: Special priority has been given to power stations (including hydroelectric stations), gas works, coal/oil conversion plants, projects to assist the production and transport of coal, and atomic energy projects. In addition, special action is taken to arrange for supplies for housing work, development area factories, and other urgent work where special difficulty arises.

Sir W. Smithers: Is the Minister aware that owing to his interference with the law of supply and demand there is now no cement for housing?

Mr. Key: I do not accept the hon. Gentleman's statement that no supplies of cement are available for housing. There is the question of the distribution to sites but I am sure that if we left it to the law of supply and demand the needs of housing would get small consideration.

Mr. Bossom: Will the right hon. Gentleman see that the tile works which require cement get some, because if builders cannot get the tiles they cannot complete the houses?

Mr. Key: We are giving special consideration to that.

Mr. Cooper: Would the Minister agree that if the cement industry was as efficient as it should be, there would not be this shortage of cement?

Mr. Joynson-Hicks: Did the Minister intend to assure the House that there is no shortage of cement, apart from its distribution?

Mr. Key: I was not asked to deal with the question of shortage of cement, but


with its distribution. There is a shortage of cement arising out of the fuel difficulties in the early part of the year. Production is now increasing, and by the end of the month I think that we shall have overcome our difficulties.

Mr. D. Marshall: asked the Minister of Works if he is aware that cement to the value of £1,093,000 was exported in the four months ended 30th April, 1947; and if he proposes to continue the export of cement at this level.

Mr. Key: The quantity exported in this four months was 303,750 tons. This rate of export has now been reduced to about 50,000 tons per month, almost all of which is for destinations specially approved by the Government.

Mr. Marshall: Is the Minister unaware that there was a fuel crisis when he decided to export this cement, and is he aware that in Cornwall and the West of England the housing programme is considerably curtailed because of the lack of cement?

Mr. Key: If this cement had not been exported other difficulties might have arisen.

Colonel Crosthwaite-Eyre: Can the Minister give the destinations which received special Government approval?

Mr. Key: In the main, it was destined for projects in the Colonies sponsored by the Colonial Governments and supported by the Colonial Office.

Mr. Beechman: Will the right hon. Gentleman bear in mind that the programme of building council houses and other vital buildings is being seriously interfered with by the shortage of cement?

Mr. Key: I am quite aware of that, and I will do all that I can to see that difficulties arising in special areas, due very largely to transport difficulties in the South-West, are overcome.

Sir W. Smithers: May I ask the Minister whether the difficulties of distribution to which he has referred are not due to centralised control by a totalitarian Government?

Major Bruce: Will my hon. Friend say whether the cement was exported by a Government Department specifically, or by private enterprise manufacturers?

Mr. Derek Walker-Smith: asked the Minister of Works why so long a time elapsed between the presentation to him of the Report on Cement Costs and its publication.

Mr. Key: The interval is accounted for by the consideration of the Report and its preparation for publication.

Mr. Walker-Smith: Is it not an unhappy coincidence that all the reports presented to the right hon. Gentleman's Department have had a very long period of delay, and if the right hon. Gentleman must go on taking up the paper so badly needed for book publication, cannot he at least publish these reports in adequate time?

Mr. Key: They are published after due consideration, and consideration of the needs of other publications.

Builder's Certificate, Camberley

Major Mott-Radclyffe: asked the Minister of Works why the certificate of registration as a builder, under Defence Regulation 56AB, was withdrawn from Mr. F. C. Bath, Camberley, Surrey, on 3rd October, 1946, while he was engaged upon a contract to build 10 houses for the Easthampstead Rural District Council in Park Road, Sandhurst, and not re-issued until April, 1947.

Mr. Key: The registration certificate was revoked on the recommendation of the Registration Panel because of failure to observe industrial agreements. Mr. Bath was subsequently prosecuted by the Director of Public Prosecutions and was fined on 22nd March, 1947. The certificate was re-issued in April on the recommendation of the Registration Panel.

Major Mott-Radclyffe: Is the Minister aware that the only reason why this dispute arose was because the Building and Civil Engineers Employment Holidayswith-Pay Company refused to honour an old holiday-with-pay card, because they alleged that it was presented after its validity had expired?

Mr. Key: That was the subject of consideration by the registration panel who removed the certificate.

Mr. Nicholson: Is it not a fact that what the Minister said in his first answer casts a reflection upon a gentleman who is a constituent of mine, was not the case


one of extreme prejudice, and is it petty for his Department to hold building in this small-minded way?

Mr. Key: What I said on the matter cast no aspersion on the person concerned. All I said was that he was subsequently prosecuted and as a result was fined.

Major Mott-Radclyffe: Is the right hon. Gentleman aware that the prosecution only took place several weeks after the company had agreed to cash such out of date holiday-with-pay cards as were presented?

Mr. Key: That is not my responsibility.

Embassy, Rome (Rebuilding)

Major Mott-Radclyffe: asked the Minister of Works whether the decision to erect a new Embassy building in Rome at the cost of 350,000 was taken before or after the present building suffered bomb damage; and what alternative sites were considered and found to be unsuitable.

Mr. Key: The existing Embassy at Rome stands on an excellent site of seven acres which has been the property of His Majesty's Government for the past seventy years. Even before the bomb outrage the buildings were, however, in-adequate for modern requirements. It had been proposed to build new offices on a portion of the site and to exchange the remainder of the site and buildings for a more suitable property. This is no longer possible and it is now proposed to demolish the existing buildings and erect a new Residence and offices on the same site. I am advised that no more suitable site than that already owned by His Majesty's Government is available.

Major Mott-Radclyffe: Can the right hon. Gentleman say why in Rome of all the capitals of Europe it is necessary to have a new Embassy instead of converting the existing palace for a sum of money less than £350,000?

Mr. Key: That is the advice which has been given to me, and I see no reason to doubt its wisdom.

Mr. Eden: Can the right hon. Gentleman tell us why the exchange to which he referred cannot be carried through? It

would have avoided this vast expenditure.

Mr. Key: No, Sir, it would not have avoided the vast expenditure as far as I can see, because the building was damaged and, therefore, a new building must be erected; but I will look into the question of exchange again.

Mr. Eden: If the right hon. Gentleman will look at his answer he will see that he himself talked about an exchange contemplated with another building, and that is why I am asking him why the exchange was not carried through.

Mr. Key: I do not know that I have said it could not be done, but what I have said is that it is proposed to build new offices on a portion of the site. I am not saying that is not being carried out. All that I am saying is that it is now proposed to demolish the existing building and to rebuild. If there is any question of exchanging part of the site, I Will look into it again.

Mr. Eden: The original proposal, when I was at the Foreign Office, was to exchange our Embassy for another building and to build on part of the site. Why has that exchange not gone through?

Mr. Lipson: Would the right hon. Gentleman bear in mind that the spending of £350,000 at this time might cause great public indignation?

Major Mott-Radelyffe: In view of the unsatisfactory nature of the reply, I beg to give notice that I shall raise this matter as soon as possible on the Adjournment.

M.A.P. Bungalows, Huyton (Transfer)

Mr. Shaweross: asked the Minister of Works whether he is aware that negotiations for the transfer of the M.A.P. bungalows at Page Moss, Huyton, from his Department to the Huyton with Roby Urban District Council have been proceeding for nearly two years; that his regional property agent failed to refer the matter to the district valuer, thus wasting to months; and when will this transfer be completed.

Mr. Key: These negotiations began in February, 1946. Such sales are made at a valuation assessed by the district valuer, but it was not found possible until January, 1947, to agree with the Council the


basis of a joint submission to the valuer. It is hoped to have the decision of the valuer shortly.

Mr. Shawcross: Will the right hon. Gentleman see that these negotiations are concluded as soon as possible in view of the grave discontent that exists in this district?

Mr. Key: As soon as we get a decision from the valuer we shall attend to the matter.

Roadway, St. James' Park (Repair)

Mr. Shawcross: asked the Minister of Works why no steps have been taken to repair the potholes caused by the frost in the roadway in St. James' Park, especially near the Horse Guards; and how much longer this road will be left in its present dangerous condition.

Mr. Key: The road across the Horse Guards Parade from the Mall to Birdcage Walk is to be entirely resurfaced this summer. In the meantime any potholes considered dangerous to traffic are being patched up.

Mr. Shawcross: Would it not be better if these and similar roads were given over to the Westminster City Council or at least the responsibility for their repair be farmed out to that authority?

Mr. Key: I see no reason to believe that at all.

Lieut.-Colonel Lipton: Will the right hon. Gentleman have a look at some of the potholes in Bird Cage Walk as well?

Oral Answers to Questions — PRIVATELY OWNED INDUSTRY (GOVERNMENT POLICY)

Mr. Stanley Prescott: asked the Prime Minister what proportion of industry in the United Kingdom it is the policy of His Majesty's Government to allow to remain in private ownership.

The Prime Minister (Mr. Attlee): As the House will recall, my right hon. Friend the Lord President of the Council made a full statement on 19th November, 1945, in which he gave a general indication of the further Measures His Majesty's Government proposed to introduce during the life of the present Parliament to bring certain essential services under public

ownership. I do not think that there is anything which I can usefully add to that statement.

Mr. Prescott: Is the Prime Minister aware that in Canada the Lord President of the Council stated that the Socialist policy was that 80 per cent. of industry in England should remain under private enterprise, and recently on the Continent Professor Laski stated that 80 per cent.—

Mr. Speaker: I think that the hon. Member is not asking for information but giving it.

Mr. Prescott: May I ask the right hon. Gentleman, in view of the conflicting statements made by leading politicians of the Party opposite, if he would consider making a detailed statement of Government policy in order that industrialists, working people, housewives and the middle classes may know where they stand?

The Prime Minister: I think that the general public understand perfectly well the statements made in this House, and perhaps the hon. Gentleman would attend to those and not to reports from persons who are not Members of the Government.

Lieut.-Colonel Dower: Can the right hon. Gentleman say, in order to remove the feeling of uncertainty which is prevalent in the country, which of these industries will not be interfered with, so that they may have confidence to go ahead?

The Prime Minister: Yes, Sir; and I am sure the hon. and gallant Gentleman will help us so as not to have any disturbance in their minds.

Mr. H. Strauss: Does the right hon. Gentleman's original answer mean that the Government are uninfluenced by any experience since 1945?

The Prime Minister: No. Sir.

Oral Answers to Questions — GOVERNMENT DEPARTMENTS, STAFFS (REVIEW)

Wing-Commander Hulbert: asked the Prime Minister, if he is now in a position to make a statement on the result of the Government's review of the number of persons employed in Government Departments.

The Prime Minister: I hope to make a statement very shortly.

Wing-Commander Hulbert: Does the Prime Minister realise that there is public disquiet on this matter, and can he give any indication when this statement will be made, and what he means by "very shortly"?

The Prime Minister: In the course of a few days.

Sir W. Smithers: rose—

Mr. Speaker: The hon. Member must not expect to ask a supplementary on every question.

Mr. Eden: On a point of Order. Is it out of Order for a hon. Member to rise to ask a supplementary question?

Mr. Speaker: It is not out of Order for an hon. Member to rise, but it is not necessary that I should call him.

Sir W. Smithers: On a point of Order. May I draw your attention, Mr. Speaker, to the fact that, to the best of my memory, I have only asked two supplementary questions this morning, and I wanted to ask the Prime Minister a supplementary on Question No. 45.

Mr. Walkden: Both of them were crazy, anyway.

Sir W. Smithers: May I also ask if it is in Order for an hon. Member to say that "Both of them were crazy, anyway"?

Lord John Hope: When you, Mr. Speaker, say that an hon. Member is not expected to ask a supplementary on every question, is it not the case that you exercise your judgment in calling the next question with reference to the time already expended on the last question? Surely, the fact that one hon. Member has asked a supplementary does not preclude him from asking one later on?

Mr. Speaker: I think that the House will readily agree that the hon. Member to whom I referred did not wait to be called. He was asking a question as he got up.

Wing-Commander Hulbert: On a point of Order. The hon. Member said that my Question was "crazy, anyway." [HON. MEMBERS: "No."] May I ask your guidance, Mr. Speaker? Is that not a reflection on the Chair?

Mr. Speaker: I was not aware that the hon. Member's Question was put down as crazy. I understood that someone made that remark about a supplementary question, or a hypothetical supplementary: but, in any case, I did not hear it.

Oral Answers to Questions — AGRICULTURE

Requisitioned Country Houses (Land Army)

Mr. W. Shepherd: asked the Minister of Agriculture if he is aware that many country houses are still under requisition housing land army workers; and what steps he is taking to make permanent provisions for such workers and thus release these houses to their owners.

The Minister of Agriculture (Mr. Thomas Williams): Yes, Sir; I am aware that a number of houses are held on requisition for use as hostels for agricultural workers, including the Women's Land Army. Houses are released whenever this is consistent with my duty to ensure maximum food production. Provision of permanent accommodation is not practicable or desirable in present circumstances.

Bird Life (Preservation)

Mr. David Renton: asked the Minister of Agriculture whether he is aware that, owing to the exceptionally severe winter, there has been a considerable reduction in the bird population of the British Isles, with the result that the danger of insect pests has been increased; and what steps he is taking to bring to the notice of the pubic the importance of preserving bird life.

Mr. T. Williams: Yes, Sir, and I am sending the hon. Member copies of Press notices that have been issued on this subject by my Department. There has also been a broadcast talk by one of the Ministry's technical advisers.

Mr. Renton: Can the Minister say whether his efforts have met with any result?

Mr. Nicholson: Would it not be a good thing, in order to encourage the preservation of valuable bird life, to take active steps to destroy jays and magpies?

Mr. Williams: That is a matter of opinion.

Mr. John Morrison: Is the Minister aware of the damage done by caterpillars to many trees, and can he say what steps are being taken to deal with them?

Mr. Williams: As I have indicated, certain forms of publicity have taken place, and there has also been a broadcast by one of the Ministry's technical advice I do not quite see what else can be done.

Hill Sheep (Winter Losses)

Lieutenant-Colonel Dower: asked the Minister of Agriculture what are the losses suffered by hill sheep farmers due to the abnormally bad winter conditions; and whether, in view of the time which must necessarily elapse before the agricultural fund now being raised on a voluntary basis is completed, advance payments will be made by His Majesty's Government in cases of urgency.

Mr. T. Williams: Of the estimated total of more than 4,000,000 sheep and lambs lost in Great Britain, it is estimated that the losses of hill sheep and lambs are of the order of 3,000,000, representing a value of about £5½ million. I understand that provisional payments from the Agricultural Disaster Fund to meet urgent cases will be authorised as soon as sufficient information is available to enable this to be done. Farmers can also apply for advance payments in respect of next year's hill sheep subsidy.

Lieutenant-Colonel Dower: Will the Minister, while appreciating the very grave losses suffered, also recognise that in a number of cases the question of immediate help is of vital importance? In such cases, if help came later, it might not really be of any value because the men concerned might have been put out of business.

Mr. Williams: That is why immediate steps were taken, and are being taken, to deal with the matter.

Dairy and Poultry Produce (Barley Allocation)

Mr. Beswick: asked the Minister of Agriculture whether he will give an estimate in value or quantity of the extra amount of dairy and poultry produce which could be raised in this country if an extra 50,000 tons of barley were allocated to the industry.

Mr. T. Williams: An additional allowance of 50,000 tons of barley to dairy cattle, unaccompained by a proportionate allowance of high protein feed, would not substantially increase the milk supply. The addition of the same quantity of barley to the various feedingstuffs allocated to poultry, however, would permit the maintenance of a sufficient number of extra birds to produce about 8 million dozen more eggs, which at farm values would be worth rather more than £1¼ million.

Opencast Coal Sites (Restoration)

Major Legge-Bourke: asked the Minister of Agriculture in how many cases the restoration of top soil on sites formerly worked for opencast coal has commenced before inspection by A.E.Cs.; and what steps are taken by his Department to protect the interests of the occupiers of the land so restored.

Mr. T. Williams: The agricultural executive committees are consulted at a very early stage in the work of restoration and invariably before the top soil is spread on the surface of the site. The committees take charge of the sites after the top soil has been spread satisfactorily, and from that stage onwards they are responsible for the further measures of restoration, such as seeding to grass, cultivation, manuring, and grazing. Sites are not released from requisition until the committees are satisfied that the restoration has been properly carried out.

Major Legge-Bourke: May I send the Minister particulars of a case where restoration did take place before the agricultural executive committee had inspected the site; and would the right hon. Gentleman bear in mind that where land has been so restored and the effect has been deleterious, it is extremely unfair unless the agricultural executive committee and the Minister back him up?

Mr. Williams: I should like to see the case the hon. Member has in mind; I will certainly look into it.

Mr. Baldwin: Is the Minister aware that, in spite of what the Minister of Fuel and Power has said these opencast mining areas do not keep the top soil separate, and the result is that when the ground is levelled it is completely sterile.

Mr. Williams: If the hon. Member will give me a specific case, I will have it looked into.

Major Legge-Bourke: asked the Minister of Agriculture how many acres of land restored after opencast coalmining during the previous 12 months have been cropped for cereals; what has been the percentage crop compared with the local average on normal land; and if he is satisfied that this cropping policy should be continued on sites due to be restored in the next two years.

Mr. T. Williams: As a general rule, land restored after opencast coal mining is first sown to grass. Occasionally, owing to the urgent need for increased cereal production, it has been decided to crop land for cereals. Of the land restored during the past 12 months some 470 acres were sown to cereals and the yield is expected to average some 50–60 per cent. of the local average on normal land. The question whether land should be cropped or sown to grass is decided on the merits of the particular site, the nature of the top soil, and other local factors. The experience gained on sites already cropped with cereals will be a useful guide.

Major Legge-Bourke: Would the Minister bear in mind that the fertility of these sites when they have been restored is likely to be low to start with, even supposing they produce 50 or 60 per cent. of the normal crops, and will he give some assurance that this policy will not be continued longer than absolutely necessary?

Mr. Williams: I am quite satisfied that the county agricultural executive committees who have charge in the early days of restoration know just what the qualities of the soil are, what the sites are like, and what is best to do with them in the early days.

Betterment Claim, Huntingdonshire

Mr. Renton: asked the Minister of Agriculture why his Department refused to give to Mr. P. Humbley, the owner and former occupier of Grange Farm, Steeple Gidding, Huntingdonshire, details of the £2,000 demanded from him by the Huntingdonshire A.E.C. in lieu of a claim for betterment under Section 23 (5) and (6) of the Agriculture (Miscellaneous) War Provisions Act; and whether he will take steps to give such details to Mr. Humbley at an early date.

Mr. T. Williams: In accordance with the provisions quoted by the hon. Member, the Committee's offer was based on an estimate, provided for them by a valuer in private practice, of the increased value of the farm as a whole attributable to works of improvement carried out by the Committee. Details of such a valuation assessing betterment—which is no doubt made by a comparison of the overall value of the farm before and after the improvements for which betterment is due have been carried out—are not given by the valuer.

Mr. Renton: Would the Minister say why, when a man is being asked £2,000 for parting with his own farm, he should not be given precise details of how the sum is made up?

Mr. Williams: As I have already explained to the hon. Member, it is because details are not submitted to the Department. As the hon. Member must know, in default of agreement between the Department and the farmer in question, arbitration is always resorted to.

Mr. Bossom: Is not the Minister aware that these estimates must be made up from details, and not be just a guess, and cannot he have the details supplied? If not why not?

Mr. Williams: I have already stated that the valuer does not submit details—[HON. MEMBERS: "Why not?"] Because, apparently it is the right thing not to do so. [HON. MEMBERS: "Oh."] Well, this is the first time this matter has been questioned and I can assure the hon. Member, and hon. Members generally, that the sum of money referred to is far less than the actual cost to the State. I repeat that, should there be any lack of agreement, the case will always be submitted to arbitration.

Mr. Wilson Harris: Would not a Minister anxious to do justice between the Department and the individual see that such details were submitted?

Mr. Williams: We are always prepared to do justice.

Mr. Solley: Is not my right hon. Friend aware that it is the practice of surveyors not to give details when estimating a sum by way of compensation and betterment, but to give a lump sum, and in the absence of agreement the matter goes to arbitration?

Mr. Williams: That is the usual practice.

Colorado Beetles (Channel Steamers)

Mr. Janner: asked the Minister of Agriculture how many Colorado beetles have been found on Channel boats during the past few weeks; and what steps he is proposing to take to prevent the arrival of the beetles by these means.

Mr. T. Williams: Since 1st May seven Colorado beetles have been found on Channel boats, and nine more on vegetables reaching the country by this means. As regards the second part of the Question, propaganda is undertaken at the Channel ports, and the crews of Channel steamers are well aware of the need to report any discoveries of the beetle.

Mr. Nicholson: Could not one of these animals be stuffed and put into the Library?

Fowl Pest

Lord Willoughby de Eresby: asked the Minister of Agriculture if he has formed any estimate of the number, in dozens, of eggs lost during the next 18 months as the result of the slaughter of poultry on account of fowl pest.

Mr. T. Williams: About 21,000 birds have been slaughtered because of fowl pest. The potential production from those birds during the next 18 months might be estimated very roughly at some 260,000 dozen eggs.

Lord Willoughby de Eresby: Does the right hon. Gentleman think that the serious loss in egg production has been offset by the value of the dead fowls imported into this country which have caused this outbreak of fowl pest, and would he not agree with me that the country will be the loser in the long run on this deal?

Mr. Williams: It all depends where the hon. Member's calculation starts. If it starts from the first outbreak of fowl pest, perhaps he would be right. If, however, his calculation was for the many months or years during which we have been importing the carcases of poultry, perhaps his calculation would be wrong.

Mr. Joynson-Hicks: Is the right hon. Gentleman satisfied that he has got this very serious disease under control, or is he afraid it will still spread?

Mr. Williams: All I can say is that all our poultry experts are doing everything they can to stamp out fowl pest.

Mr. Walkden: Has the Minister any comparative figures of the millions of eggs lost because of the failure to exercise control in order to eliminate black market racketeers?

Machinery

Mr. Hurd: asked the Minister of Agriculture the number of combine harvesters which he expects will be in use for the coming harvest as compared with last year; and if British makers have been able to obtain sufficient steel to maintain their full output.

Mr. T. Williams: About 5,000 combined harvesters are expected to be in use for the coming harvest as compared with 3,800 last year. I am afraid that, so long as steel remains in short supply, it is inevitable that manufacturers will find difficulty in obtaining supplies. I can, however, assure the hon. Gentleman that, in determining the allocations of material to makers of agricultural machinery, the requirements for combined harvesters have been given full consideration. My Department has done, and will continue to do, everything possible to assist manufacturers in overcoming their difficulties.

Mr. Hurd: asked the Minister of Agriculture if he has now placed orders in the U.S.A. to meet all outstanding requirements of tyres for Farmall H tractors; and when he expects that the farmers, whose tractors are meanwhile immobilised, will get delivery of these tyres.

Mr. T. Williams: Three of the four sizes of tyres used on the Farmall H tractor are now made in this country; the fourth will be made here as soon as material and fuel shortages permit. In the meantime this size is being imported from the U.S.A. by tyre manufacturers against firm orders placed with them. Some supplies have been received during the past two months, a further consignment has just arrived, while another is now in transit from the U.S.

Mr. Hurd: Can the Minister say when these outstanding orders for tyres will be met?

Mr. Williams: I am afraid I could not give an estimate. I only know that I


have ordered sufficient to meet all our requirements and it depends on how quickly they arrive from the United States.

Commander Maitland: Could the right hon. Gentleman say when these orders were first placed?

Mr. Williams: Not without notice.

Mr. Walter Fletcher: Can the right hon. Gentleman explain how it is that three sorts of tyres made of rubber and cotton can be produced here while the fourth cannot? What materials are lacking?

Mr. Williams: The hon. Gentleman would be aware that moulds and other preliminaries are not available.

Mr. John Lewis: Is it not a fact that there is no shortage of moulds whatsoever, and that the shortage of this particular size of tyre is due to the general shortage of carbon black in the United States?

Oral Answers to Questions — NEW ZEALAND (GIFTS TO BRITAIN)

Commander Noble: asked the Under-Secretary of State for Dominion Affairs whether he is aware of the great "Food for Britain" drive which has been going on in New Zealand during the last few months; and whether our appreciation and gratitude has been recorded.

The Under-Secretary of State for Dominion Affairs (Mr. Bottomley): Yes, Sir. I am well aware of the generous action of people in New Zealand in voluntarily surrendering food coupons and thus increasing the exportable surplus which can be made available to this country. I am happy to take this opportunity of again expressing publicly on behalf of the Government and the people of this country our deep sense of gratitude for these generous acts, in New Zealand and in other Dominions, as well as for the continuing supply of gifts of food both in bulk and in individual parcels.

Oral Answers to Questions — HOUSE OF COMMONS, CATERING (CIGARETTES)

Lieut.-Colonel Lipton: asked the hon. Member for Walthamstow, West, as

Chairman of the Kitchen Committee, whether he will arrange for cigarettes at the rate of 10 for 1s. 3d. to be available to Members.

Mr. McEntee: If supplies become available in sufficient quantity we will meet the request. At present all supplies go to the Staff Canteen, and Members could only be supplied by diverting supplies from the staff.

Lieut.-Commander Gurney Braithwaite: Is it not a little unfortunate at this moment that a Question should appear on the Order Paper suggesting that hon. Members should obtain cigarettes at a cheaper price than the general public at a time when the Chancellor of the Exchequer has just raised the tobacco tax, for which hon. Members opposite voted with enthusiasm.

Mr. McEntee: As a consequence of the increase in the price of cigarettes due to the tax there is, all over the country, an increased demand for cheaper cigarettes. The consequence of that is that it is not possible for the Kitchen Committee to get larger supplies than they have been getting. As a matter of fact, our supplies during the last two years have not reached anything like the demand that has been made for them.

Mr. Dumpleton: On a point of Order. Is it in Order to make such an unwarranted imputation against the hon. Member who put the Question down, seeing that these cigarettes are available to the public at these prices.

Mr. Speaker: I think it was quite obvious that the hon. Member was asking for information.

Lieut.-Commander Braithwaite: May I say further to that point of Order that, of course, there is no implication against the hon. and gallant Gentleman. No misunderstanding would have arisen if the Question had made clear to what type of cigarettes the hon. and gallant Gentleman was referring.

Lieut.-Colonel Lipton: Everybody other than hon. Gentlemen opposite know that certain brands of cigarettes are available to the general public at a cost of 10 for 1s. 3d.

Oral Answers to Questions — QUESTIONS TO MINISTERS

Sir W. Smithers: On a point of Order. In view of the fact that you earlier admonished me, Mr. Speaker, I would ask you to explain where I was out of Order and, for my future guidance, to tell me whether I am entitled to rise as often as I like to ask supplementary questions.

Mr. Speaker: The hon. Gentleman is entitled to rise as often as he chooses, but it does not follow that I shall call him. I think it is perfectly obvious from other supplementaries that an hon. Member who rises and starts to talk before his name is called goes to the bottom of the queue.

Orders of the Day — FINANCE BILL

Further considered in Committee [Progress, 11th June].

[Major MILNER in the Chair]

NEW CLAUSE.—(Allowance for housekeeper of blind person).

When a taxpayer is blind crippled or otherwise incapacitated by reason of age or infirmity and in consequence is compelled to employ a housekeeper he shall be entitled to an allowance of fifty pounds in respect of that housekeeper.—[Mr. G. Thomas.]

Brought up, and read the first time.

The Chairman: Mr. George Thomas.

3.31 p.m.

Lieut.-Commander Clark Hutchison: On a point of Order, Major Milner. I understand that it might be for the convenience of the Committee if the Clause which stands on the Order Paper in my name and that of my hon. Friend—(Constant attendant allowance)—were considered at the same time as the proposed new Clause in the name of the hon. Member for Central Cardiff (Mr. G. Thomas)

The Chairman: The hon. and gallant Gentleman has put down a new Clause which is very similar to that proposed by the hon. Member for Central Cardiff, and I have no objection if he wishes to move the new Clause standing in the name of the hon Member for Central Cardiff.

Lieut.-Commander Hutchison: In moving the new Clause standing in my name, may I say that I moved a somewhat similar new Clause in connection with the first Finance Bill of 1945, and at that time the Financial Secretary to the Treasury express43 sympathy with its object?

The Chairman: Perhaps I did not make it clear to the hon. and gallant Member that I called him to move the new Clause standing in the name of the hon. Member for Central Cardiff (Mr. G. Thomas).

Lieut.-Commander Hutchison: I beg to move "That the Clause be read a Second time."
I am sorry I misunderstood you, Major Milner. I think everybody will agree that


a proposal of this nature is deserving of the sympathy of the Chancellor of the Exchequer because people suffering from such an appalling infirmity as blindness require all the sympathy that can be given to them. The same applies to those who are incapacitated by some other physical disability which will always prevent them from earning their own livelihood. As I was explaining before you called me to Order, Major Milner, I spoke on this matter during the Debate on the first Finance Bill of 1945. It is true that I was concerned mainly with people who suffered from some physical disability, but the case is exactly the same whether the disability is blindness or some loss of limb, paralysis or something of that nature. Although the Financial Secretary at that time was sympathetic to my proposal, he took his stand on the report of the Royal Commission of 1920, which implied that it was impossible or, at least, undesirable to cater for individual considerations in matters of taxation. I feel, however, that it would be quite wrong to leave the matter there. Things have changed a great deal since 1920 in the realm of taxation law and taxation policy, and since then more account has been taken of individual circumstances. Indeed, I understand that under this very Bill it is the intention of the Chancellor of the Exchequer at a later stage to move an Amendment allowing for certain reductions in the price of tobacco for old age pensioners—an Amendment which will be welcomed by everybody and which definitely bears out my contention that consideration should be given to individual circumstances.
I submit that the original argument of the Financial Secretary no longer holds water. For the benefit of those hon. Members of the Committee who were not present in November, 1945, when I raised this matter previously, I would explain that I have in mind the case of persons who are injured by an accident or who, perhaps, suffer from some chronic disease and are therefore quite unable to fend for themselves without someone in the nature of a housekeeper or attendant to look after them. This is obviously a rather limited category for two reasons. In the first place, men and women who may have the misfortune to be seriously injured and incapacitated as a result of an accident which occurs in the course

of their employment will, to a large extent, be covered by the National Insurance (Industrial Injuries) Act, Section 15 of which provides for a constant attendance allowance of 20s. a week or, in exceptional cases, 40s. a week. Similarly, men and women who received wounds or injuries as the result of their service in the Forces are also eligible for a constant attendance allowance of 20s. a week or, in exceptional cases, 40s. a week, under Article 14 of the Royal Warrant.
It is clear, therefore, that the great majority of people who are prevented from following any employment owing to an accident or disease will be covered by these two categories, and that only comparatively few will be left out and will be in need of financial assistance. It is for this reason that I feel that the Committee ought to press the Chancellor to give them some relief. A point which was made by the right hon. Gentleman the Financial Secretary on the previous occasion was that there might be some difficulty in deciding whether a person was or was not sufficiently disabled to qualify for an allowance of this nature. Once again I cannot agree with his argument because obviously there must be in existence—for dealing both with those who come under the National Insurance (Industrial Injuries) Act and those who come under Article 14 of the Royal Warrant—some method for grading applicants for an allowance and for deciding whether or not they are eligible. Surely it is perfectly simple to use some similar rules for grading people who may suffer from an accident incurred in civil life. In the past 25 years a great deal of useful social legislation has been passed by the House, but unfortunately there are still anomalies in various directions, and this is one. This small section of people, scattered throughout the country, who are not at all vocal but deserve our sympathy, are left out. This new Clause is designed to give them some slight assistance, and we ask the Government to pay serious attention to the point.
These civilian injured or disabled people are at present in a very difficult position. They have no pension. They may be living upon the charity of relations, and in many cases they are probably rather a serious financial burden on those relatives. In other cases they may


be living on small fixed incomes obtained as a result of the investment of money paid to them by way of compensation for the accident they suffered. The cost of living has risen considerably since 1939. In 1939 it might have been possible for these injured persons to employ someone to look after them and wheel them about in bath chairs. It is now probably quite impossible for these unfortunate people to find the necessary funds to continue to employ any attendant. This is a matter which ought to be looked upon with great sympathy by the Government. This is a modest Clause designed to bring justice to a small, unlucky and, I am afraid, forgotten section of the community, and I hope that the Chancellor of the Exchequer will be able to accept it.

Mr. Mellish: I wish to support this new Clause. Only recently there was brought to my notice a case which throws this matter into relief and puts it in its true perspective. A lady in my Division who had suffered from infantile paralysis since birth has overcome that handicap and is being employed in some important offices in the city, earning a certain sum of money. She has always employed a relation to do her household work, and as a result of that she has been able to claim the dependants' allowance as Income Tax relief. Now her sister has left her and she does not get that allowance. There is a case for people suffering from a disability of some description which makes it impossible for them to do any work in their homes and impossible to earn a normal livelihood. This new Clause is very reasonable and Should be supported in all parts of the Committee.

Mr. Anthony Greenwood: The hon. Member for Central Cardiff (Mr. G. Thomas), who was to have moved this new Clause, is not able to be here this afternoon, and I am sorry that I was not here to move it when it was called. I am very grateful to the hon. and gallant Member for West Edinburgh (Lieut.-Commander Hutchison) for the full and detailed way in which he has put the case which my hon. Friend and I should have put. There is little that remains to be said, but I would emphasise that, as the hon. and gallant Member said, the purpose of this Clause is to remove an anomaly and to bring

benefit and help to a number of fellow citizens who, through no fault of their own, have fallen on misfortune. I cannot believe that it has been the intention of other Governments or that it is the intention of His Majesty's present advisers to leave this small section of the community unprovided for in this way. I hope that the Chancellor of the Exchequer will find it possible to make this concession and to bring this relief to these unfortunate and deserving people.

3.45 p.m.

Mr. Niall Macpherson: The case has been put for the blind and crippled, and I would like to put the case for the old, the infirm and the widower. It often happens that someone who has attained the age of 70 or more suddenly becomes a widower. Throughout his life he has been accustomed to rely upon his wife, and when at that age he finds himself a widower it is rather late for him to learn and he finds himself unable to look after himself. That is the sort of case the Chancellor of the Exchequer should bear in mind. It is obvious that the man must have someone to look after him, and it is eminently reasonable that an allowance should be made.

Mr. Daggar: There are one or two observations I would like to make in support of this Clause, especially as another Clause which embodies the same principle will not now be called. This Clause is not only clear and concise, but it is free from complexities, and therefore requires little explanation. Its great advantage is that its acceptance will not put an undue strain upon the financial resources of the country, and, at the same time, it will give considerable financial relief to the persons affected. I imagine that the number of persons who will benefit will not be many. I have in mind the case of a man whose wife is totally blind. That necessitates the engagement of another women to perform the customary duties of the household. Were this person entitled to be described as a housekeeper, which implies responsibility for the care of children, the proposed Clause would be unnecessary, as the usual allowance would be made of £50 for a person who has to accept responsibility for looking after children. Many persons in such unfortunate circumstances are not in the higher income classes. The case I have


in mind is not in that category. As the Chancellor of the Exchequer is familiar with such cases, I am content to leave to him the decision whether this Clause should be accepted.

Mr. Charles Williams: The whole Committee, and especially the Chancellor of the Exchequer, must congratulate my hon. and gallant Friend the Member for West Edinburgh (Lieut.-Commander Hutchison) on having been here to move so good a Clause. This Clause is obviously a human one, and although I would not like to guarantee anything, I think it must appeal even to so hard a heart as that of the Chancellor of the Exchequer, if it is possible for any human thing to touch him. These people should be given some small advantage by the Exchequer on their tax returns. They are suffering from a disability, and those of us who have bad eyesight know what a tremendous disadvantage it is if one cannot see properly. So far as the blind are concerned there is an absolutely cast-iron case for the appeal for help. Then there are those who are crippled and aged and so are deprived of many of the things that we value most. I rejoice that, thanks to the assiduity of my hon. and gallant Friend, we have had the chance of debating this Clause today when it so easily might have gone unmoved and undiscussed owing to the absence of the hon. Member for Central Cardiff (Mr. G. Thomas) in whose name it stood.
When we are dealing with these financial questions we are concerned to bring the hardest cases to the notice of the Chancellor of the Exchequer. Although I am not wedded to the wording of the Clause, and it may not be possible to take in all the classes mentioned in the Clause, I would ask that this small remission might be given to the blind. Could we have some estimate what it would cost the State for the three classes, or even only for the blind? Would it be a large charge? I realise that the Chancellor is pressed on this occasion for many concessions, but of all the concessions which have been asked for, this is one which would appeal to both sides of the Committee. It is perhaps the hardest of all cases that could be put up, and I ask the right hon. Gentleman, if he cannot do something this year, not to leave

it as some vague hope for the years to come, because for the aged that hope is not a very strong one.

The Financial Secretary to the Treasury (Mr. Glenvil Hall): As I understand it, the proposition is in respect of a resident housekeeper, though it does not say so in the new Clause. It is that a resident housekeeper's allowance should be granted in respect of a person who is blind, crippled or otherwise incapacitated by reason of age or infirmity. In this short discussion hon. Members on both sides of the Committee have extended the suggestion to other forms of incapacity. That, quite frankly, is the answer which I have to give to the Committee. It would be relatively easy to give an allowance of this kind to a person who was blind or crippled, but once we are asked, as inevitably we would be asked, and as we have been asked this afternoon, to extend it to other categories, it is impossible to know where to stop. I admit that this allowance is in rather a muddled state. It began as a housekeeper's allowance to a widow or widower who had young children in the home who needed looking after. In 1924, the proviso that there must be young people in the home was dropped, and a widow or a widower who had to keep a resident housekeeper was given this allowance. It was then felt, and not without reason, by all other sections of the community that this was rather unfair and, in 1943, it was extended to other types of Income Tax payers if they had young children in the home. This afternoon we are being pressed to extend this allowance still further.
It is difficult on sentimental grounds to resist the suggested new Clause, but I must ask the Committee to reject it for the reasons I have given. I would remind hon. Members that there are other ways of helping people in the situation envisaged by the discussion. A fair number of these people will not come into the Income Tax paying class at all, so that even if you gave the allowance to people suffering these disabilities, very many would not have an income large enough to take advantage of it. Although I do not press that too far, we have to bear it in mind in discussing this matter. Then, too, we have to remember that with the introduction of the social security scheme, many of these people will be helped by various provisions—by the National


Health Insurance scheme or by one or other of the sections of the scheme which has to come into full force next year. It is true, as the hon. and gallant Gentleman the Member for West Edinburgh (Lieut.-Commander Hutchison) mentioned, that I called in aid last year in replying to a similar Debate, the Report of the Royal Commission which sat in 1920. I can only repeat what I said then and what the Royal Commission said. Hon. Members might not think a great deal of my point of view or that of any Member of this Committee, but I think I am entitled to remind hon. Members of the way that Commission reported, for it was drawn from various sections of the community, including experts on Income Tax. They came to the conclusion that you could not take the individual and personal circumstances of a taxpayer into account but must look at this matter in a broader way, on the broad basis of general principles. The principle here undoubtedly is that if we gave an allowance for anyone who happened to be crippled, we should have to extend it to all kinds of people who were suffering various other incapacities and we would not know where to stop.

Lieut.-Commander Hutchison: But is that not just what the Chancellor, very rightly, is proposing to do in the case of old age pensioners—taking individual circumstances into account?

Mr. Nigel Birch: There is a good deal of force in what the Financial Secretary says about the danger of extension which the drafting of this new Clause holds within it, and obviously the Treasury might be led into a great deal of expenditure and much examination of particular cases. There is, however, one limited case which he might look at. The case I have in mind is almost exactly that put by the hon. Member for Abertillery (Mr. Daggar), of the wife of a man who becomes blind and therefore he needs a housekeeper to look after her. I would ask the right hon. Gentleman to consider whether it would be possible if not this year then another year, to give a housekeeper's allowance to a husband whose wife becomes blind. There is already special legislation for blind people and this appears to be a reasonable extension of it.

4.0 p.m.

Mr. Scollan: I have listened very carefully to the reply

made by the Financial Secretary, and I was much impressed by the case put by the hon. and gallant Member for West Edinburgh (Lieut.-Commander Hutchison), and supported by my hon. Friend the Member for Abertillery (Mr. Daggar). I was amazed because my right hon. Friend in his reply seemed to skip lightly over the fact that the whole of the reliefs of which he spoke were based on the principle of extra expenditure being necessary in the home. He said that we could not legislate for the individual case. We do not require to do so if we base ourselves on the principle that in some circumstances extra expenditure is necessary in the home, and lay down on that principle that some relief should be granted. For the life of me, I cannot see why this relief should not be extended in such cases. An allowance for a wife is based on the understanding that that woman, doing necessary domestic work without earning an income, means extra expenditure of the income of the house. If a housekeeper is taken into the house, an allowance is granted on the same principle. If a cripple needs some one to come in to help with the work, where is the difference? I want to know.
When a Royal Commission went into this question, the attitude at that time to the type of people for whom we are now pleading was entirely different from what it is today. What they were concerned about then was how to get most for the State and to give the least service. That is entirely changed. I would like the Chancellor to have another look at this matter, and to see that, if the principle is generally accepted that rebates should be allowed because of extra expenditure in the home, cases like these should receive a rebate. One new Clause on the Paper lays down that the person must be in constant attendance. I do not like that. I knew of a man who had three children and employed a housekeeper to look after them. Another man had a small room and a kitchen and two children, and could not bring a woman into the house. He employed a woman who lived in her own house, but came in in the morning, and went away in the evening. For that he could get no relief; but the expenditure was the same as that of the man who could provide accommodation. We want to meet cases like that.

Lieut.-Commander Gurney Braithwaite: Despite the benevolent


phrasing of the Financial Secretary's reply, I do not think there is any doubt that he has caused widespread disappointment on all sides of the Committee. He rested his main reasons for being unable to accept the new Clause, on two cm three arguments. One was that we should get very wide in our extensions if we were not careful, and that while certain categories in the new Clause, such as the blind, crippled, aged and infirm were mentioned, suggestions made by hon. Members in their speeches would go a good deal further. The remedy for that, of course, is in the hands of the Government. If they feel that hon. Members are advocating too wide an extension, let them at least go some part of the way. I gathered from what the Financial Secretary said that the blind, crippled and aged were excellent cases. If that is so, there is no difficulty at all in inserting words on the Report stage to cover those cases. He also said that it would leave certain people outside, as they did not come into the Income Tax purview. That is true, but this is a Finance Bill, and we are dealing with Income Tax and cannot at the moment do more than look after the interests of Income Tax payers. We are endeavouring to get a relief for people who do pay Income Tax.
A third argument on which the right hon. Gentleman did not lean very heavily —which I think was wise, because it is very weak—was that the National Insurance scheme would remedy some of these difficulties. He did not tell us how, or what, because I do not think he knows. I thought the hon. Member for West Renfrew (Mr. Scollan) made a very good point about constant attendance, and the difference between those who can provide accommodation in the house and those who cannot. I am not a lawyer, but I should have thought the interpretation of "constant attendance" implied one employed full time in that capacity, whether resident or not. I think that was what my hon. and gallant Friend the Member for West Edinburgh (Lieut.-Commander Hutchison) had in mind—

Lieut.-Commander Hutchison: Lieut.-Commander Hutchison indicated assent.

Lieut.-Commander Braithwaite: —and if I am right in that interpretation, I think it would meet the point. If someone is employed full time to look after a blind

person, or a cripple, we want to provide for that case by this new Clause.
Another argument used by the Financial Secretary rather surprised me. He said that we must rest ourselves in this matter on the findings of a Royal Commission which sat in 1920. That was rather a long time ago. The Financial Secretary has told us many times during his period of office that he is a Member of a Government which has moved away from all those things which happened in 1920, that they have a new outlook, that the 25 years of Tory misrule are over, and that we are now in a brave new world where we are all better fed, and so on. It is rather surprising to find that because the right hon. Gentleman wants to deny the housekeepers' allowance to blind and crippled persons, he immediately goes back to a Royal Commission of 1920. That is not a very good argument, if only because previous Governments have already moved away from it. He told us that Governments, which no doubt he would describe as reactionary, in 1924 and 1926 moved away from the Royal Commission's findings a small way along the road. I do not think that is a very good argument for a Socialist Minister, and it shows the weakness of the Government's defences on this matter.
This has been a useful Debate. The hon. Member for Heywood and Radcliffe (Mr. Anthony Greenwood) was not here in time to move the new Clause. But we have heard him since, and the Opposition came to his rescue. He is in time to press the Motion to a Division, and I hope he will have the courage of his convictions, and will not give way to the blandishments of the Financial Secretary, however benevolent the right hon. Gentleman may be. The electors of Heywood and Radcliffe will want to see him stand firm. He came in by a very small majority, which might melt away. If the hon. Member decides to carry his convictions to the acid test of the Division Lobby, I, for one, will be there to march with him.

Mr. Lipson: I hope that the speech of the Financial Secretary was not the last word of the Government on this new Clause. I do not think that the right hon. Gentleman was altogether happy in opposing it, because I am quite sure that his natural inclination was to accept it. As a result of not really believing in the case he had to make, he was,


if he will forgive me for saying so, singularly unconvincing, and the arguments which came from the Front Bench were really surprising. I have never been convinced of the merits of the argument that I must not do what I know to be right because I am afraid that if I do so, I shall be asked in the future to do something else which is right. The Financial Secretary said that it would be comparatively easy to do what is proposed in this new Clause, but that if he were to do this, he would be asked to do more. I could understand the argument if he were to say, "I can go as far as is proposed in this new Clause but this year, at any rate, cannot go any further." I hope that it is the policy of His Majesty's Government, when their attention is drawn to things that are really wrong to anomalies that exist, to say, "We cannot put them all right at once, out we will, each year, put right as many as we possibly can."
I therefore, say to the Chancellor that if he will make the concession this year to the blind, I, personally, will be satisfied. He can say "That is as far as I can go this year. I will look and see what the financial position is in future years to see whether T can go further." The second argument used by the Financial Secretary was that a great many people would not benefit by this provision because they had not to pay any Income Tax. It is perfectly fair to reply that to that extent the concession would cost the Government very little. We are concerned with those who have to pay in a case of this kind. I wish to stress particularly the case for the blind. It must be obvious to everyone that if a person is blind a housekeeper is essential. I would ask the Government to be true to themselves in this matter, to make this concession, which would not cost them very much, and not to be afraid either now or at any time, of doing the right thing because they might be pushed further along a road along which I hope they intend to go.

Mr. Collins: This new Clause is far too wide in its application to make possible its immediate acceptance, but I would join with other speakers in asking the Chancellor not to take that undoubted fact as an excuse for not permitting a badly needed, if limited application in special cases, as an augury of what may be done in the future along lines which must have the sympathy of everyone in the

Committee, and which has the obvious sympathy of the Financial Secretary. I would also urge that when this matter is considered the Chancellor does not fall into the obvious error of making a distinction between resident full-time housekeepers and full-time housekeepers who are not resident, because in many cases that is merely a difference arising out of lack of accommodation. It would be absolutely absurd to grant an allowance in one case because a person was living in, and not to grant an allowance in another case merely because it is a physical impossibility for the housekeeper to live in the home. Elderly people often have limited accommodation and have not provided in their houses for the circumstances which have arisen to call for the employment of a housekeeper.
4.15 p.m.
I would ask for consideration to be given to an important special case; that is where the daughter of the house has to stay at home and look after an invalid mother. It does not really matter whether the husband is elderly and is working or not. There are many instances of this kind, where the mother is an invalid, possibly blind or completely incapacitated. There is an allowance to the husband in respect of the wife, but in addition he has to keep a daughter at home to look after the home and the mother. In spite of the fact that the Financial Secretary thought that many people would not be affected, there are many cases of people with limited means to whom this allowance would make a great difference. In such cases daughters are living a life of sacrifice, and a denial of this allowance means an addition, which I regard as an unnecessary addition, to that sacrifice. I hope, therefore, that in spite of the fact that it is fairly obvious that the new Clause cannot be accepted as it stands, the Chancellor will tell us that he will look at it again with a view to giving limited application of allowances to important cases which must not be overlooked any longer.

Mr. Oliver Stanley: I was disappointed with the reply of the Financial Secretary. I should like to congratulate my hon. and gallant Friend the Member for West Edinburgh (Lieut.-Commander Hutchison). It is entirely due to his presence of mind that we have been enabled to discuss this extremely important


new Clause, which would otherwise, owing to the absence of the hon. Gentleman whose name appears on the Order Paper as its mover, have gone by default. This is an important new Clause, and one which raises considerable feelings of sympathy in all parts of the Committee. I must say that when the Financial Secretary began by saying that the law on this subject was in a muddled condition, I had feelings of hope. I thought, as did my hon. Friends behind me, that to a Member of the Government for whom, we understand, muddles exist only as a challenge—I must confess that during the last two years they have been a challenge to almost every Minister of the day—the fact that the law was in a muddled condition could only be a prelude to doing something to alter it. But not a bit of it. As the right hon. Gentleman went on, he made it perfectly clear that that muddled condition was to remain, because, according to him, the condition was muddled, but it was also hallowed. It was muddled because it did not work fairly, but hallowed because it had been blessed by a Royal Commission 27 years ago. To make that sanctity even greater, the right hon. Gentleman added, almost with bated breath, that that Royal Commission even included some people who were experts in Income Tax law.
I do not think that the Committee ought to be content with being fobbed off—I can only so describe it—on a matter of this importance, with a stock answer, which remains, and has remained for many years on the Treasury shelves, which is brought down yearly, and which usually, though not on this occasion, has the dust knocked off it before it is delivered in the Committee. We really should make an attempt now to get away from the precedents of past years and to see whether, in fact, it is not possible to do something to meet a case of admitted hardship. All of us quite see the danger of one concession being subsequently exploited to lead to another, and of the case which in the first instance seemed to be limited and circumscribed becoming finally something so large that it threatens the structure of the Act. That might happen, but is it inevitable that it should happen? Is it not possible that just as a bound has been set for many years to the one breach which has already been made in this principle, so, for many

years, if another breach was made it might still remain unenlarged?
On this subject we must consider three things. First, is there a real hardship; second, can the sufferers from that hardship be clearly defined; and, third, is it financially practicable at present to do something to meet the hardship? I submit on the first question that there is no argument. Every one has had brought to their notice instances where real hardship exists. On the question of whether or not the field of relief can be closely circumscribed, I believe that it can. The new Clause which we are now discussing is quite clearly defined in its contents. It would apply to a limited and quite clear class of recipient. On the third point, is it financially practicable this year? If the right hon. Gentleman will say that we cannot do this because it would cost so much, I should be inclined to listen to him, because this is not a year in which we want to impose big new burdens on the Exchequer.
The Financial Secretary did not refer to the extra cost, but I cannot think that it is likely to be very substantial or that, other things being equal, it would be of such an amount that it would make this new Clause impracticable for this financial year. I submit, therefore, that the three questions which in this sort of topic we must ask ourselves have all been answered, or can be answered, satisfactorily, and that a case does exist for really serious consideration of this point. If the Chancellor cannot immediately announce his acceptance of this proposal, he should, at any rate, give to the Committee some greater hope of a new approach to the subject than the rather archaic reply which was given to the Committee by the Financial Secretary.

The Chancellor of the Exchequer (Mr. Dalton): I have listened to the Debate with close attention. A number of very interesting contributions have been made from both sides. I agree with my hon. Friend the Member for Taunton (Mr. Collins) that this new Clause as it stands really is not suitable for acceptance in any case. It would need looking at again. It is true that, as my right hon. Friend said, this law is somewhat confused owing to a number of separate rearrangements, with Amendments first here and then there over a term of year? I am wholly in favour of reviewing the whole question


of allowances of this kind to people who are suffering—the blind have been mentioned and there are the aged, the cripples and others. Whether or not this is the best way of dealing with this particular case of human need, with which we are all very sympathetic, I do not know.
My right hon. Friend the Financial Secretary pointed out that our new social legislation would have a bearing on the matter. Some doubt was cast upon the accuracy of that statement. For example, there is a new Clause on the Order Paper in the name of the hon. and gallant Member for West Edinburgh (Lieut.-Commander Hutchison) in reference to a "constant attendance allowance" in cases of physical disability. Although this is not what we are technically discussing at the moment, I give it to the Committee as an illustration of how our social legislation is affecting the matter under the National Insurance (Industrial Injuries) Act. Under Section 15 of that Act there is a provision that:
The weekly rate of a disablement pension payable in respect of an assessment to 100 per cent. shall be increased by such amount as is hereinafter mentioned, if as the result of the relevant loss of faculty the beneficiary requires constant attendance.
In other words, the claim that is put here in terms of an Income Tax concession is met in another form in the case of industrial injuries by a proposal for an increase of the pension.

Mr. Stanley: That refers only to industrial injuries.

Mr. Dalton: Certainly, that is so far as industrial injuries are concerned. That is one of the cases which is covered.

Lieut.-Commander Hutchison: I quoted that in the course of my remarks, but I mentioned that there would be cases which did not come under that legislation. There would be accident cases and others.

Mr. Dalton: Certainly. I only mentioned that to illustrate the relevance of the general body of the legislation which the House is passing in relation to social insurance to show that the situation will be beneficially modified in regard to certain sections of the community for whom we have sympathy. That should be taken into account. Quite frankly, I would like to review the position as it results from two sets of changes which are taking place. First, there is the

general body of our social legislation and, second, there are the Income Tax reliefs of what I may call the normal kind, which we have been bringing into effect and which have been carried even a little further this year, as the Committee will recall, partly by the earned income relief and partly by the dependent relative allowances which will pick up a certain number of these cases.
Next year we shall have our social legislation in full operation. I must not make commitments here, but it may or may not be possible for further advances to be made in terms of the Income Tax reliefs of the normal type. This will have the result, which my hon. Friend the Member for Abertillery (Mr. Dagger) had in mind, of narrowing the range over which this particular benefit would be of any advantage. As he pointed out, there are persons in certain income groups who are already relieved and to whom this would mean nothing because no Income Tax would be chargeable anyhow. There are certain others who gradually would be brought within that field.
I do not think that the hon. Member for Cheltenham (Mr. Lipson) will disagree with what I am now going to say. I understand and sympathise with the view which he put. We must draw and hold a defensible line of demarcation. We must be clear that if we draw a line at a certain point it is a line which can properly be held and that we shall not then be subjected to continual pressure, which different hon. Members in various parts of the Committee may join, to extend the line still further until we have really created a stage of affairs in which, for practically any extra expenditure in the home, Income Tax reliefs are being claimed, as was said by my hon. Friend the Member for West Renfrew (Mr. Scollan). We must be careful how far we travel on that road. Extra expenditure even though it arises in connection with disabilities of one sort or another, might be very great. There might be extra expenditure outside a home, in a nursing home or hospital or in any other place where people might be attended. I mention this to show that it is essential to look at the thing to see where we can draw a frontier that can be reasonably fixed, not for all time but for a period of years.
I will give this undertaking to the Committee. I will very gladly look into the


whole question covering not only the blind or the aged and cripples, but the whole field of personal disability, to see how far we can link up the consequences of our social legislation, the consequences of our other Income Tax changes, and the possibility of doing something here. I undertake that this shall be studied and looked at between now and next year, so that we can see whether we can make a workable and equitable scheme. I do not think that this year we can do anything further. The speeches made this afternoon show that the views of hon. Members are by no means one. Some hon. Members have built up a case and other hon. Members have demolished it for them. In the circumstances, I hope that we shall be allowed to pass on and that this new Clause will not be pressed.

4.30 p.m.

Mr. Beechman (St. Ives): Would the right hon. Gentleman give us the cost of making the concession for whole-time housekeepers to the blind, of which this Committee is overwhelmingly in support?

Mr. Dalton: I should not base my attitude on the grounds of the cost of a particular limited concession. I would base it on the wider considerations which I have put to the Committee.

Mr. C. Williams: May we be told what is the cost, or be given some idea?

Mr. Dalton: The cost is so small that I do not want to use it as an argument against it.

Mr. Williams: Then there is no reason against it?

Question put, and negatived.

NEW CLAUSE.—(Reduction of entertainment duty on stage plays, etc., to 1939 rates.)

On payments for admission to entertainments held on or after the third day of September, nineteen hundred and forty-seven entertainment duty within the meaning of the Finance (New Duties) Act, 1916, shall be charged, in the case of entertainments chargeable at reduced rates by virtue of Subsection (3) of Section one of the Finance Act, 1935 (that is to say, where all the performers whose words or actions constitute the entertainment are actually present and performing, and the entertainment consists solely of one or more of the following items, namely, a stage play, a ballet, whether a stage play or not, a performance of music, whether vocal or instru-

mental, a lecture, a recitation, a music hall or other variety entertainment, a circus or a travelling show), as if for the rates set out in Part I of the Fifth Schedule to the Finance Act, 1943, there were substituted the rates set out in the Fifth Schedule to the Finance Act, 1939.—[Sir A. Herbert.]

Brought up, and read the First time.

The Chairman: Sir Alan Herbert.

Mr. Bowles: On a point of Order. Do I understand, Major Milner, since you have called the junior Burgess for Oxford University (Sir A. Herbert), that neither of the new Clauses in my name has been selected—namely (Whisky) and (Rebate of duty on whisky).

The Chairman: Neither of them has been selected.

Sir Alan Herbert: I beg to move, "That the Clause be read a Second time."
I must say that I am very sorry to appear as a poor understudy for the hon. Member for Nuneaton (Mr. Bowles), whose new Clauses I am sure would have provided a most interesting discussion. In moving this new Clause, which stands in the names of many hon. Members in all parts of the House, I must at once, according to the rules, declare my interest in this matter, because, if it were agreed to, it might be that, next September—one never knows—it might benefit me financially, not as a manager, but as a humble playwright. The effect of the new Clause is to reduce the rate of Entertainment Duty to the rate which existed before the war. In 1939, it was roughly about half the present rate, because it was just about doubled during the war. The Chancellor of the Exchequer the other day kindly gave me some figures. I had asked him a Question—I am afraid it was rather ambiguous—as to the yield of the Entertainment Duty on the living stage for the last financial year, and the right hon. Gentleman gave me the answer of £5,500,000, which is about 10 per cent. of the total yield of Entertainment Duty on all amusements, including horse racing, dog racing and all the rest; but I am not clear whether that figure includes those kinds of entertainments which are mentioned in the new Clause, such as ballet, a lecture, a recitation, music hall or other variety entertainment. If there was any ambiguity, it was my fault; but, so far as the living stage is concerned,


from what the Chancellor has said, the revenue is surprisingly small. So far as the living stage is concerned, this new Clause involves, I reckon, a sum of about £2,750,000, but I do not call that a loss of revenue, because I call the duty robbery. I would like to visualise for the Committee what these figures really show. The sum of £5,500,000 is taken by the State after the public pays £18 million, and, after the State has taken that amount, the managers are left with about £13,750,000. That shows the proportion.
Might I deal briefly with the history and the nature and the operation of this duty? It was first introduced by the Finance (New Duties) Act, 1916. In the original Bill, there was also proposed a similar tax on railway tickets. One can imagine what an outcry there was—and I can imagine what it would be now—against the imposition of a purchase tax on railway tickets and the tax was almost immediately abandoned. This is interesting, because, after all, a bus or a railway carriage is very similar to a theatre; they both cost just as much to run whether they are full or half full. However, that tax was abandoned and the Entertainment Duty was retained. At that time, the rate was about 7 or 8 per cent. In 1939, the rate was about 20 per cent., and that is the rate to which I am suggesting it should return. I am not saying today that it should be abolished though I should like to: I am making the most modest suggestion that it should be halved.
This is a bad duty and always has been, owing to its nature. First, it is bad because it is a tax upon receipts, not upon what goes into the bank, but upon what goes into the till. Any tax upon receipts is questionable, but a tax on receipts upon what is the most speculative of all human activities must be bad in itself. The production of plays, concerts, recitations, variety shows, is not like selling a packet of matches or a bottle of whisky, something for which the demand is certain and about which there is very little difficulty today. Here no man can command success, and when he does achieve success, a hundred causes over which he has no control may take it away. I remember many managerial post-mortems in the past, at which we agreed that nothing is good for the theatre. Bad weather is bad for the theatre, and very good weather is

bad for the theatre. When the sun is shining people want to play tennis, and, when it is wet and cold, they would rather stay at home and read a book. Again, before a holiday, they are saving their money for their holiday, and, after their holiday, they have no money left. In times of national mourning, they do not feel like going to the theatre; in times of national rejoicing, the Government puts on State processions, parades, and firework shows free of Entertainment Duty, or an industrial exhibition. Indeed, we used to decide that there are only two good days for the theatre in the whole year. One is Christmas Day and the other is Good Friday, and on both of those days the theatres are closed.
There are other factors to take into account. The tenor may develop laryngitis, or the baritone may fall under a bus, or an actress may go off and have a baby. In my last show it happened that both leading ladies after three months, went off—bless them—to increase the population. There are other hazards over which the producers have no possible control, and yet this is the industry on which the Government decide to levy a tax upon receipts.
It is, perhaps, more instructive still to regard the duty as a Purchase Tax upon the original price of tickets, and, regarded in that way it is far more formidable. On a seat costing 4s. 6d., the duty is 1s. 4d., leaving 3s. 2d. to the manager—a tax of 42 per cent On a seat costing 10s. 6d., the duty is 3s., leaving 7s. 6d., and that is a Purchase Tax of 41 per cent. On a 16s. stall, which a manager is most reluctant to ask the duty is 45. 8d., the manager keeps 11s. 4d. and the tax is 41 per cent. There are many good reasons why we should not impose either a receipts tax of 30 per cent. or a Purchase Tax of 40 per cent. upon theatres or music. One is the nature of the commodity. There is no Purchase Tax on books, nor is there any on newspapers; because, although all books and all newspapers are not equally or wholly enlightening, on the whole, and by and large, as the sailors say, they are part of the area of enlightenment, they are part of the foods of the mind. Therefore, no civilised Government should impose Purchase Tax upon them.
The same applies to the theatre, concerts, and, it we are to be logical, to the cinema. However, the cinema is a very


different problem. In the cinema one can produce the same play four times a day and seven days a week, whereas the theatre can produce the same play only eight or, at the most, nine times a week, and it has only six days against seven days. Therefore, I am not bothering much about the cinema now. I am concerned with living entertainment, about which a distinction has already been made by Parliament in 1935. Let me add this, although I suppose I need scarcely remind the Chancellor of this fact. We have here an exportable product. I do not know what the British theatre and British actors have earned in dollars during the last few years but the amount must be very considerable. A year or two from now it may be very difficult to sell a British motor car, but we shall still be able—at least, I hope so—to sell British plays and books. But we cannot export British plays unless they are based upon a healthy and prosperous home industry. Nobody would have thought of bringing over here the famous play "Oklahoma" unless it had had a very long and successful run in New York.
Another reason why we should not levy a sort of Purchase Tax upon this commodity is that Purchase Tax is normally levied on the wholesaler and is based upon the cost of manufacture. This is a tax on the retailer and is based on the sales price. Also, I understand Purchase Tax is intended to discourage expenditure, and I hope the right hon. Gentleman, whose Government have provided £65,000 (is it?) for the Arts Council, will not say that he wishes to discourage people from going to the theatre or to concerts. So far as theory is concerned, then, it is a bad tax—a tax of 30 per cent. upon receipts, in a speculative industry, and, looked at in the other way, it is a Purchase Tax of 40 per cent. upon one of the areas of enlightenment and mental refreshment.
Now may I say a few words of illustration about the operation of this tax? Many managers are very "cagey" about their plays. They do not like to show their wounds. But I am authorised to give a few figures about Mr. C. B. Cochran's last production but one, which was seen by many Members of this House, including Mr. Speaker and the Serjeant at Arms, neither of whom, apparently, considered the author should be committed for con-

tempt, although it dealt with the proceedings of this House. It was a light musical play, but it had a sort of "message;" it paid respect to our institutions, and particularly to this place. [An HON. MEMBER: "Who was the author?"] I have been humbly trying to avoid bringing that up. He is one of the hon. Members for Oxford University. That play went on tour for ten weeks and played to packed houses everywhere it went. It gave a great deal of pleasure and, although I say it myself, I think some little inspiration to many large audiences. During those ten weeks the public paid £39,000 to see the play. Of that, the management handed over £11,000 to the State. [An HON. MEMBER: "Hear, hear."] Yes, but at the end of that ten weeks' successful tour, not merely had the manager made no profit, but he had lost money. Does the hon. Member still say, "Hear, hear?" The cost of production of that play was about £12,000. If the manager had been allowed to keep in his pocket £11,000—I am suggesting in my Amendment that he should keep only £5,000—he would, at least, have been able to pay off something of his production costs.

4.45 p.m.

Mr. John Paton: Is the hon. Member arguing that the total cost of production should have been borne by the provincial tour?

Sir A. Herbert: Not at all. I am saying that if one entertains people in five provincial capitals for ten weeks, it is a curious thing if one comes back to London with no profit at all, having handed over to the State the sum of £11,000. That seems to be a fairly simple proposition. However, we came back to London. There we "went very big" indeed, in July. The play went just as big as "Oklahoma" has done. Seats were booked up for months, and for 15 solid weeks the public paid £5,800 a week to see this play. Of that sum, the State took £1,700, leaving £4,100. The running costs weekly were £3,000. The cost of production was £11,000 or £12,000, and a simple calculation will show that the manager had to work for 11 or 12 weeks before he got back the cost of production and could begin to make a profit. Is that not an astonishing way of doing business? We carried on, with all the hazards, including those of leading ladies having babies and


tenors having laryngitis, and eventually after 31 weeks of successful entertainment the play came off. During all those months the public had paid £154,000, of which the State took £45,000 and the management lost, I learn today, £4,000. Is there anybody in the world who would like to carry on a business on those terms?
I could mention a few more examples. I have read that great shows like "Oklahoma" at Drury Lane can afford it. I hope so; but that remains to be seen. Let me tell the Committee what happened not so long ago to another play by a very celebrated British author at Drury Lane. There was a loss of £38,000, and the State took £25,000. Does that make sense? True, the loss was so great that not even the remission of tax would have prevented a loss, but, while I agree that Income Tax and Surtax should be charged on people's profits, this wretched tax should not be imposed upon people who are losing money.

Mr. Paton: I am sorry to interrupt the hon. Member again, but I am anxious to understand his argument. Is his argument this, that if this tax were wholly or partially remitted, it would then be possible for theatre companies to increase their prices?

Sir A. Herbert: No.

Mr. Paton: Because if that is what the hon. Member is saying, and if the prices were increased as a result of the remission of tax, in what way would the public benefit?

Sir A. Herbert: If the public pays £12,000, which is not paid to the State but is left in the bank, the theatre has something to play with. In reply to the question, the objective, the hope of the entertainment world is to reduce prices. Let me give an example. In the old days, the price of a stall for a straight non-musical play was 12s. '6d., from which the State took 2s. and the management took 10s. 6d. The top price now is 13s. 6d., of which the State takes 3s. 10d. and the management takes the rest. In other words, the public pays a shilling more and the management gets tenpence less. If my new Clause were accepted—or, better still, if the duty were abolished altogether—prices would go down, and there would be adjustments which would benefit both the public and the managements. Not the State, I quite

agree. I am suggesting that the State should take less money. That is quite a simple thing. I will develop the argument in a minute. The object is not to increase prices. The managements hope to reduce prices. If prices were lower more people would buy more tickets. I should have thought that that was a perfectly simple proposition.
If I may give one more example of the way in which this business is being conducted, let me quote this one. This is about a gentleman who does not wish his name to be mentioned publicly. But I got the information, lest I had the figures wrongly, in a letter from a chartered accountant about the yearly earnings of this particular man, who is a very good man in the theatre—not a playboy who bounces in to make money, but a good man of the theatre, a respected manager. During the year ended 31st May, 1947, he paid out in salaries to artists £89,000; he paid to the State, Entertainment Duty of £68,000; he made a loss of £17,000. I hope that what I am driving at it will now be clear to hon. Members.
The point is that people cannot possibly run business on those terms. They do go on. How do they go on? They seek more and more the line of least resistance. They tend more and more to bring over established successes from New York—most of them very good, but not all of them so good as all that. Less and less are they ready—I do not blame them —to take the risk of producing new British plays. So we have people like Mr. Priestley knocking at the door year after year with plays, interesting plays which are not certain of success, to be sure, but which ought to be produced.
I am glad, indeed, to see my hon. Friend the Member far Eton and Slough (Mr. Benn Levy) here, because he is a very respected member of the dramatic world, a very fine playwright. I am sorry he has not put down his name in support of my new Clause. I think I know the reason he has in mind for not supporting me. He is in favour of the non-profit-making arrangements set up under the Finance Act last year. I say nothing against him, or against those arrangements. But I very much doubt their working. I wonder whether these arrangements are going to lead to much creation—to creative activities in the theatre. I am rather afraid that the non-


profit-making people are very likely to go to the non-copyright, non-royalty-earning plays like those of Shakespeare and Congreve, and to opera, and that sort of thing. Certainly, those arrangements are doing good, because it will be quite impossible to produce more opera if we have to pay Entertainment Tax. But, I wonder, are they ever going to produce anything to stand up to "Oklahoma" and those other big American musical plays, for example? It is rather important that we should stand up to them. Big Ben "cost £12,000 to produce. There is another play whose name I will not mention—I do not want to advertise —that cost £15,000, because prices of everything have gone up. I wonder what non-profit-making person is going to put money on that sort of thing, especially if he is told that, while there is no profit or interest for him, the management are going to get no more than £25 a week?
The curious thing about this non-profit making business is, that there is nothing about non-wage-earning or non-royalty-earning or non-salary-earning. Authors, actors, composers, and the bands may all go on earning what they like and making their own contracts. It is only the producer, who, very often, is the creative impulse of the whole thing, who is not allowed to make more than £25 a week. But whether these arrangements are good or bad, there is no compulsion on anybody to be a non-profit making person; and as it is the policy of the Government to nationalise this and that, but to make what is left as prosperous and as enterprising as possible, surely it is not the intention of the Government -to drive what is called the commercial manager out of business altogether? Or is it?
I shall very soon hear somebody say, I know, "It is all rents: it is all a question of rents." If it is a question of the rents that are charged for theatres, then I hope the Government will do something about it. But the Government are doing nothing about it, and nobody, so far as I know, is proposing to do anything about it. The President of the Board of Trade has refused to appoint a working party to go into the theatrical industry. The hon. Member for Ashford (Mr. E. P. Smith) invited it, and I am not sure that it is not a good idea. But I think that there is a great deal of exaggeration of

this question of rents. First, if I accuse the Government of taking £1,700 out of the till every week of a theatre, it is really no answer to say that that is right because the man who owns a theatre has taken £500 out of the till. The man who provides the theatre has a right to something. He has taken a risk; he has provided something; he has some obligations. Whereas the State has done nothing and provided nothing and has no obligations.

Mr. E. P. Smith: Will my hon. Friend agree that two wrongs do not make a right?

Sir A. Herbert: I agree it is not right to have an Entertainment Duty—especially the Duty as it is—simply because high rents are charged. But I think there is an exaggeration about these rents. I have been looking into the matter. I am told that the number of the rapacious rentals that are charged can be counted on the finger of one hand. Certainly, as I know, the lessee who is on "sharing terms," as they call it, has obligations. He has in some cases got to provide staff for the whole theatre, the house staff, the box-office staff, the stage door people Or, in other cases, he has got to pay his ground rent, local rates and water rates and insurance, which may run into £2,000 a year. Indeed, the cost of the upkeep and maintenance of a large theatre may be something like £15,000 a year. If that is the case it is not surprising if high charges are made for the use of theatres, especially as the owners have got to take the risk of the theatre being left empty on their hands, and I think, as things are going, that before long there will be a great many theatres left empty on the owners' hands. However, my main point is this. If there is anything wrong about that it is for the Government to deal with it. In the meantime, there is my new Clause, which deals not with rent, but with Entertainment Duty.
Then there will be people who will say, "This is merely another indirect tax. It is not really a thing that should bother managements. It is a thing for individuals themselves." One answer to that is: Why should the individual have to pay tax of 40 per cent. in respect of a theatre, going to a play, going to Harringay as if it were a bottle of whisky? I will not say a bet, because the Chancellor of the Exchequer has not had the courage


to tackle the bookmakers yet. Why should music and plays be obliged to pay such a tax? And it is not true that the tax can always be passed on. I have a letter here from the owner of the Vaudeville Theatre. I will not weary the Committee with the whole of it, but the writer says that the theatres are charging substantially less in effect now than 10 years ago, simply because the limit has been reached of what the public will pay. He says:
Our capacity after deduction of tax is £241 as against £265 in 1937.
In other words, part of the deduction now falls on the producer and not on the public; presumably, because the public will not pay more for going to the theatre —and who can blame them? The managers want to bring prices down. Let me repeat the example which the hon. Member for Norwich (Mr. J. Paton) dragged out of me somewhat prematurely. Prewar stalls for a non-musical play, top price, 12s. 6d., 2s. to the State and 10s. 6d. to the manager; now, 13s. 6d., with 3s. 10d. tax and 9s. 8d. to the manager. That is 1s. more for the public and 10d. less for the manager. Can anybody defend that?
5.0 p.m.
Although I have dealt chiefly with the theatre, about which I know most, all this applies to music and concerts. I am told that people who run orchestral concerts—they do not make them pay—cover their expenses by means of recitals when they bring the distinguished foreigners over. By what they gain on the swings in that way they manage to keep orchestral concerts going. A very recent example of musical enterprise is that great British Music Festival at Harringay, run jointly, I believe, by the Greyhound Racing Association and Mr. Jack Hylton, a distinguished member of the Labour Party. I met Sir Malcolm Sargent just now, and he told me that that show is better than anything he has seen in Hollywood or New York, or anywhere in America. He says it is a magnificent thing: all the best music by all the best people, from all over the world, for 1s. 6d. to 9s. What is the State doing about that? Charging a tax of 40 per cent. upon every ticket. That is private enterprise, not a non-profit making society. Base private enterprise people are producing that great show, and the State does nothing to encourage them, but charges this savage tax. We can

stand up to the Americans, whether it is in music or the theatre, if we get a fair deal from the State.
I apologise for being so long. Let me say a few words about the new Clause before it is time for me to close. I hope these arguments will fortify hon. Members opposite to vote for this new Clause. During the war the duty was roughly doubled. The tax deducted on a 7s. 6d. ticket was 1s. 1d. in 1939, and it is now 25. 2d. During the war, of course, everything was easy; one could fill any theatre or concert hall with almost anything, when there were so many soldiers on leave; and then, for about a year, there were the gratuities to draw on. But all that has gone. Also, of course, during the war other forms of competitive entertainment were either curtailed or cancelled—greyhound racing, and all the rest of it. But now all the competitors have come back; money is not so plentiful, despite the efforts of the Chancellor of the Exchequer; competition is very fierce; and the cost of everything has gone up. Wages have gone up by 70 per cent.; insurance, lighting, and all the rest have also gone up. To give an example, a manager told me the other day that, to produce a very little play with one set and a few actors now costs him three times as much as it did to produce a similar play six years ago. Theatres have to be re-equipped, and new wage demands are coming along. In short, there is a very good case for going back at least to the prewar duty; though, personally, I should like to see it abolished.
There are two major musical mysteries in history. One is the old question, what song the sirens sang. The other is: Who wrote and who composed the song in the Chancellor's heart? I daresay that with his natural and necessary caution he went to some non-copyright making author, and perhaps to some Austrian composer. I should like to think that he went to a British author and a British composer; something produced by some modern man of British enterprise. I should like to think that the song in his heart was a song with which I had something to do:
I want to see the people happy.
I am sure that in the last analysis that is the song in his heart. I wish, indeed, that he or some member of the Treasury had been attached to poor Mr. Cochran


on the very day that the preparation of that particular show began, and had watched all the troubles and difficulties from first to last. I wonder whether at the end of those proceedings he would have said: "Now this is an industry which ought to bear a special tax of 40 per cent"?
I am very glad to find so many hon. Members opposite, and from other parties, supporting this Clause. I know hon. Members opposite say that they represent the workers by hand and brain, a claim which is not always enthusiastically supported on this side of the Committee. They also say—and I think it is right—that they not only want to draw the people up in the material sense, but they wish to lead them into brighter and newer fields of leisure and enlightenment. I believe that is true: and here they have a chance to do something. It is a very proud and stirring thing for anybody associated with music or the theatre to stand aside when the people go out and to see their happy faces—if the show is successful—and to hear them say that for two or three hours they have been taken out of themselves, refreshed and relaxed, and have forgotten their troubles, politics, and all the rest of it. But when they have all gone it is a very sad thing for the manager to look at the figures, even when the whole place has been packed, and to realise that the whole of that elaborate and most difficult edifice may be founded financially on a quicksand, not because of anything inherent in the structure, but because it is being undermined by the State—which, God knows, wants to see the people happy as well as we do—simply because the State, in its folly, I think, has thought fit to impose a tax of 40 per cent. upon those who cater for the happiness and enlightenment and spirit of the people.

Mr. E. P. Smith: I rise to support the new Clause which has been moved by my hon. Friend the junior Burgess for Oxford University (Sir A. Herbert), and which is supported by 30 other hon. Members of this Committee. I also must declare, as he did, that I have an interest in this matter. But, strange to say, I am not an opponent of Entertainment Duty, because I believe that in these distressful times, when vast sums of public money have to be raised by hook or by crook—and more often by crook than

by hook—it is essentially a fair duty in principle. I do not quarrel with the fact; I quarrel with the degree; and I quarrel too, with the incidence.
If we take the theatres throughout the whole country we find that the average rate of duty is 28 per cent. of the gross takings. contend that is an enormous proportion. But, if we come to the West End of London, we find that percentage rises steeply to about 34 per cent., in some cases, of the gross takings. Now that, I submit, is an almost prohibitive portion of the gross takings for the Government to mulct. We ought to remember that in this matter of Entertainment Duty, the Government are really the worst type of rentier de luxe. They do absolutely nothing of any value for the commercial theatre. They toil not, neither do they spin, Yet Solomon in all his glory never enjoyed such a rake-off.
This new Clause, like all the best causes in the world, is probably doomed to failure beforehand; its fate is probably a hopeless one. Well, I am a realist. This new Clause seeks to replace the 1943 rate Of duty by the 1939 rate of duty. It is worth reminding the Committee of the fantastic difference between these two basic rates. If we take 1939, we find, leaving out the 3d. seats, if any, that the duty was a halfpenny for a seat costing 1s. 2½d. or less, 2d. for a seat not exceeding is. 10d., but if the seat exceeded 1s. 10d., 2d. for the first 1s. 10d., and 1d. for every 5d. or part of 5d. over 1s. 10d. There are Members of the Committee who are quick and accurate arithmeticians; but, for the benefit of those who are not, I will give an example of what the duty produced, taking as our unit a stall at 16s. On that, the duty in 1939 was 2s. 6d., thereby leaving the management 13s. 6d. Under the 1943 Finance Act, the Entertainment Duty was raised even more savagely and less defensibly than the recent increase in the Tobacco Duty. It worked out like this. Leaving out all 3d. seats, it was a halfpenny on the 11½d. seats, if any, up to 1s. 4d. on a 3s. 2d. seat, that is to say, 1s. 4d. on the first 3s. 2d., and 2½d. for every 6½d. or part of 6½d. over 3s. 2d.
Going back to our unit of a stall at 16s., only 11s. 4d. accrued in 1943 to the management. I have noticed that the Chancellor of the Exchequer has closely followed my calculations, and will appre-


ciate that the management are approximately 17 per cent. less well off, taking the 16s. stall as the unit. Here I must remind the Committee that all theatrical costs have increased enormously. Rents have already been mentioned, and I will not go further into that matter, except to say that in a great many cases they have risen indefensibly, and the profit rentalist is round the neck of the production management like the old man of the sea round the neck of Sinbad the Sailor. The salaries of players, stage-hands and the front of the house staff have all increased, although I make no complaint of that. The cost of dresses, costumes, the making and painting of scenery, furnishings and hangings, required for every production, however simple, have all mounted. One thing which has not risen proportionately is the rate of the fees paid to the dramatist, and this has some bearing on the problem, because it is the dramatist who makes the money. It is not the actors or the actresses whom people come to see, nor is it the producers, the management or the landlord —the play is the thing. It is the dramatist, who makes the money, and therefore it is the dramatist who indirectly pays the duty. Since 1939, I estimate that I have earned enough for the Treasury in the shape of Entertainment Duty to pay the salary of the Chancellor of the Exchequer for more than the next to years. That is a solemn, and, indeed, an awful thought; and it is something which might well deter any would-be dramatist from writing for the theatre. In my case, however, it is tempered by the hope that a portion at least of my earnings may eventually go towards the stabling of a fiscal horse wearing my own colours—blue and not red.
5.15 p.m.
If this or some similar relief cannot be granted, I would ask whether the Chancellor of the Exchequer desires to see the commercial theatre go out of existence. If he does, his policy is perfectly comprehensible; indeed, it seems designed to that end. Last year, non-profit-making companies were freed from the obligation to pay Entertainment Duty, provided their entertainment was partly educational, which includes all entertainment—since even bad entertainment is partly educational; it shows you how not to do it. It is severely educational in that respect. An enormous number of non-

profit-making companies have subsequently sprung up. I know that the right hon. Gentleman and his hon. Friends point to this exemption as a measure of great enlightenment carried out by the Socialist Government, but I would point out that, although it was technically carried out by the Socialist Government, it was devised and was lying ready to be brought in by the Coalition Government when my right hon. Friend the Member for the Scottish Universities (Sir J. Anderson), was the right hon. Gentleman's predecessor. And, if someone at the Treasury had not forgotten all about it, the thing would have been in operation six months before his Budget of 1946. Most of these non-profit-making companies are run unexceptionably, but some are supposed—and I would put it no higher—to pay exorbitant rents, or to make utterly extravagant contracts with artists and others, because they had this huge rebate of public money with which to play.
The Board of Customs and Excise take the greatest possible pains—and rightly so —to ensure that those concerned with the management of non-profit-making companies do not make any secret profits, and that the profits, if any, are ploughed back into the venture, which was the object of the League of Dramatists when they prevailed upon the-then Chancellor of the Exchequer to exempt genuine non-profit making companies from the Entertainment Duty. The-Board of Customs and Excise have no, power to supervise contracts or expenditure. I have interviewed them, in company with my hon. Friend and opponent the Member for Eton and Slough (Mr. Benn Levy), with regard to alleged abuses, and that is what they have told us. Non-profit-making companies are therefore in an extraordinarily favourable position compared with the purely commercial managements. Speaking as a dramatist, I would far rather have a play of mine produced by a nonprofit-making company, than by a commercial management, not because I should receive more royalties, because my trade union—although we are legally free to do so if we choose—has come to a gentleman's agreement with the nonprofit making companies that they shall not be charged more than we should have received from a commercial management.


But because, with that wonderful 28 per cent. to 34 per cent. in hand, a nonprofit-making company has a greater chance of standing up to the common vicissitudes of the theatre. Expenses are ipso facto a lighter risk; and there is every chance that a play will run longer and keep the author's pot boiling for a greater period of time.
We must question whether that is quite fair to the commercial managements. Can they, in fact, compete at the present rate of duty? I rather doubt it. The inevitable slump in the theatre has set in. Not unnaturally an economic fear has seized upon the entertainment-going public, just as it has seized upon the right hon. Gentleman. If the right hon. Gentleman searches his own heart, he will find there not only a song, but a fear. The additional Tobacco Duty has hit the theatre almost as severely as the tobacconist. If we take a middle-class family—and I know the Government, with the exception of the right hon. and learned Attorney-General and the Minister of Fuel and Power, have become extremely solicitous about the middle-classes—if we take a middle-class family, let us suppose the husband smokes 10 packets of 20 cigarettes per week—not an exorbitant quantity—and that his wife smokes five. There is 15s. a week extra going out of that household's budget. Fifteen shillings will buy a couple of seats at the theatre every week, so that the theatre is definitely suffering as a result of the increased tobacco tax. After all, tobacco and the theatre are both anodynes, which help us to escape a little from the sordid realities of life. Of the two anodynes, I think the little cylindrical roll of sweet weed is backed to win every time. The late Sir James Barrie once said—

The Deputy-Chairman (Mr. Hubert Beaumont): I have allowed the hon. Member considerable latitude, but I would remind him that we are not discussing tobacco.

Mr. Smith: I submit, with great respect, that I am entitled to point out that the increase in the Tobacco Duty is having an adverse effect on the theatre and is an additional reason for reducing Entertainment Duty on theatre seats. I suggest, with all seriousness, to the Chancellor, that unless he wishes to see the commercial

theatre disappear he should endeavour to meet us in this way, by accepting this Clause or something similar. I hopes— I am sure that the right hon. Gentleman will say that my optimism is incorrigible; but, if optimism is not incorrigible, it cannot be optimism—I hope that the Chancellor, who, I believe, is not a personal devotee of the theatre, may see his way to accept something in the nature of this proposed Clause, because by taking such action he will give encouragement to a long-suffering and precarious profession which has been the favourite milch cow of himself and his predecessors and which, unquestionably, deserves a fallow period for rest and recruitment.

Mr. Benn Levy: This time last year the hon. Member for Oxford University (Sir A. Herbert), the hon. Member for Ashford (Mr. E. P. Smith) and myself embarked on a comparable controversy, and I hope the Committee will be patient with what, in effect, is a repeat performance this year. I would like very much to have found myself in agreement with my two colleagues but I should like it much more if they had been able to find themselves in agreement with me. Although I have no doubt at all that they believe that this new Clause is in the interests of the theatre, I am persuaded that it is exactly on those grounds that the Committee ought to reject it, namely that it is, in fact, against the interests of the theatre. That may appear paradoxical since it is a Clause for the reduction of Entertainment Duty, but I will try to show as briefly and lucidly as I can why I believe it to be the fact.
As the hon. Member for Ashford has just said, the theatre is in a precarious economic position. It nearly always is, and it very certainly is now. The two major factors which present themselves are: (a) the Entertainment Duty; (b) rents. I would like to say a word or two about rents, because they really are relevant to the Entertainment Duty. It is no good the hon. Member for Oxford University just "pooh-poohing" them and saying that there is a great deal of exaggerated talk about rents. There is some exaggeration, but not much. I know a theatre which before the war charged a rent of £90 a week and recently asked for a rent of £450 a week. That is a rather big increase. An in-


crease of that kind is not accounted for by any increase in costs. Let nobody pretend that it is. I quoted last year another case of a theatre which before the war was glad to get £150 to £175 a week which, was then charging a percentage of 50 per cent., which meant that they were receiving some £900 a week. That difference is not accounted for by an increase in costs. The increased rents are due to the fact that theatres are a commodity in a free market. Their price rises when there is a shortage of theatres. It rises when business is good. It rises to the point where the owners can just be persuaded to gamble on being able to pay the rent, although they know that the margin is immeasurably reduced. This is not morally to censure theatre owners. It is inevitable that that is what must happen under the present system. For my part, I hope the Chancellor will see fit to introduce a Rent Restriction Bill some time, to apply to theatres. If that is difficult, I am sorry it has not been found possible at least to accede to the request of the hon. Member for Ashford that a working party should be instituted to investigate the whole matter. I hope my right hon. Friend will consider both these suggestions. The reason why rents are relevant to the Entertainment Duty is this. It is not that two wrongs make a right. But if there are two plugholes in a bath it is no use stopping up one without stopping up the other. If you reduce your Entertainment Duty the producing manager has more money to spend. If the landlord asks for more he will receive more, so that from the theatre's point of view there may be very little to be gained.
But even if this were not true, what is to be said for the new Clause? The first thing to be said for it is that it is out of date. A few years ago the junior Burgess for Oxford University would have had a perfect ironclad case in saying that the Entertainment Duty should be reduced. But not since last year. For what happened last year? The Chancellor produced a Clause in the Finance Bill which completely and wholly exempted managers from that tax if they chose. There is now no obligation on any manager to pay any Entertainment Duty at all. [An HON. MEMBER: "On what terms? "] I will come to that in a moment. The junior Burgess for Oxford University asks merely for a reduction of the Entertain-

ment Duty to the prewar level. But in fact nobody need pay anything. There is one condition attached. Anyone who wants to be exempted from paying the tax has simply to undertake to plough the profits back into the theatre. But that is precisely what everybody who is interested in the theatre,' and who loves it, wants to happen. We want people to plough profits back into the theatre. We want to build up a large financial reserve with which the theatre can finance and support itself. If we take steps which will remove the incentive from managers to take advantage of this opportunity, all we shall do is once more to drive all the capital out of the theatre and remove all the incentives given by the Chancellor of the Exchequer to those who are prepared to keep their reserves inside it.

5.30 p.m.

Sir A. Herbert: Supposing I were rash enough to put on a big musical play costing £12,000 or £15,000 how am I going to get that money; and is it or is it not true that the manager, even if he has the reputation and long service of Mr. Cochran, is limited to £25 a week?

Mr. Levy: As to the first question—how could the hon. Gentleman raise the money?—that is a point about which I want to say a brief word later because it is, I think, one of the difficulties of the non profit making scheme. But apparently it is not an insuperable difficulty, because there have already in fact been established 40, 50 or 60 non-profit making companies, so it has been possible to do it. I would, however, like the Chancellor of the Exchequer to look into that and see what expedients there might be for further financing these companies. Secondly, the hon. Gentleman said that Mr. Cochran made a loss on a very successful show. In other words, he had to go to his bankers, or to himself if he was his own banker, and say, "Look, if I do tremendously well, I shall make a loss. Will you finance me?" Apparently, such are the engaging manners of Mr. Cochran that they said, "Yes." Surely, therefore, he could succeed as well in raising money where the return is limited as when the loss is almost inevitable? Great opportunities have been offered to any manager who loves the theatre and Mr. Cochran is certainly one of them—I have for him much personal affection and ad-


miration—but this is a. scheme ideally suited to him. I cannot understand why he did not take advantage of it. If he had, instead of losing £4,000 he would have had £45,000 in the bank. It is true that the £45,000 would have had to be devoted in putting, on other plays, but that is precisely what Mr. Cochran likes doing, and what we want him to do. Where the difficulty arises, I honestly do not understand.
I have spoken rather longer than I meant to, but I feel that the arguments are overwhelmingly against this Clause because what the Chancellor said in his last Budget—whether he knows it or not —to the managers was in effect, "Here you are, here is a preferential tax on all managers who are unwilling to keep their profits in the business." I want quite frankly to keep that preferential tax. It did not arise from any doctrinaire notion that profit-making is wicked in itself. If it had, the right hon. Member for North Leeds (Mr. Peake) and the right hon. Member for the Scottish Universities (Sir J. Anderson) who originally drafted last year's Clause, would certainly not have drafted it on the grounds that they were against the making of profits. They drafted it on the grounds that it was in the interest of the theatre. I ask the Committee—because the theatre really is an important thing—to believe that the interests of the theatre are being served by making it a condition of tax exemption that profits shall remain inside the theatre.

Mr. Hollis: I would like to support this Clause precisely because I have not an interest in the theatre in the technical sense, although I have a great interest in it in the cultural sense. The hon. Member for Eton and Slough (Mr. Levy) based his opposition to this Clause on two arguments. The first was his objection to a bath which had two plug holes. It is very odd for a bath to have two plug holes, but if it had, he said that it would be waste of time only to stop up one. If his argument had rested there, it would have been an argument for the new Clause rather than against it. If it were merely true that the theatre was suffering under two staggering blows—one a bad system of rents, and the other a bad system of Entertainment Duty—the fact that the rent problem still remains to

be dealt with, and could be dealt with along the lines suggested by the hon. Member for Ashford (Mr. E. P. Smith) would not be an argument against also dealing with the problem of Entertainment Duty. We are not concerned at the moment with arguing about the rental system in the theatre. In itself that system is not an argument against the reduction of the Entertainment Duty as proposed in this new Clause.

Mr. Levy: I thought that I had made myself clear. My argument was that, if we reduce the Entertainment Duty, let us not do it on the grounds that we are necessarily benefiting the theatre, because in point of fact we are probably only benefiting the landlord.

Mr. Hollis: I thought I made it clear that I did not pretend that I had yet come to the gravamen of the hon. Member's argument. I was going on to the remainder of his argument. His other point was about the non-profit making theatre. It is possible, as he argues, for the dramatic industry to escape all necessity of paying Entertainment Duty simply by making use of those facilities which have already been put at its disposal. I personally have no interest in whether theatre managers are prosperous or not, but I have a personal interest in the theatre and that the theatre should go on. It is from that point of view that I approach this problem. I do not mind under what system it goes on. The question we have to face in dealing with the Entertainment Duty is not whether the non-profits system as a whole is a bad system which ought to be condemned, which I do not think anyone would maintain—and I certainly would not—but whether it is now possible to do without the commercial theatre altogether.
The junior Burgess for Oxford University (Sir A. Herbert) has raised a point that certain kinds of plays which would be highly desirable in the public interest should be produced, but are not likely to be produced under the system as it is at present—the non-profit-making system—and the hon. Member for Eton and Slough to some extent agreed with that. He said that there were 40 companies on a non-profit-making basis in existence who were prepared to produce plays, but he was not quite sure what plays they were prepared to produce, and he was inclined to admit there were certain


plays which it was desirable should be produced which they would not produce. He proposed that the Chancellor of the Exchequer should look into that matter to see if he could not revise the basis of nonprofit-making companies so that they would undertake these larger activities. I am not concerned with whether this should be revised, but if it is revised we have a new situation. As things are now, these shows will not be put on and the British theatre will be likely to be deprived of these shows to its very great impoverishment. When the situation has changed, he will no doubt consider it again. At present, I maintain that even according to the arguments of the hon. Member for Eton and Slough the case for something in the nature of this new Clause has been very strongly made out.
I defend this new Clause on two grounds: first, on the ground of the interests of British art and, second, on the ground of the interests of British finance. I know that in this curious age in which we live no term of abuse is considered more wounding than to call a man a highbrow. If somebody says he wants to build a power station, the people who object are called highbrows, and the objectors indignantly deny that they are highbrows, which is considered a most insulting thing to be called. I am not one of those who consider that it is disgraceful to be interested in the preservation of British art and the British drama. When Wordsworth said he spoke the language Shakespeare spake, he did not think it altogether a disgraceful thing to do, and I do not think it is altogether a disgraceful thing that British art and drama should survive. At any rate, as indeed my hon. Friend argued, whether it be disgraceful or not it is a fact that there are these curious urges springing up in people's souls which makes some people have artistic temperaments and want to be dramatists or actors, and even want to be producers, and they will go on acting and writing plays in any event. What is far less certain is whether they will go on writing and acting plays in this country. The policy at present being pursued by His Majesty's Government towards both drama and literature is only too likely to drive all artists and dramatists out of this country so that they will give their talents and make their money in other countries, and that seems to me to be a wholly disastrous thing.
Secondly, from the point of view of British finance, I support this new Clause because, as has indeed been shown, all the arguments about a corner in British drama and so on are comparatively irrelevant. They would be extemely pertinent if we were discussing the welfare of British drama, but from the point of view of this new Clause, namely, finance, they are comparatively irrelevant because drama is by its nature in competition, not as between theatre and theatre, or as between one dramatist and another dramatist, but between the theatre itself and all other forms of entertainment and, indeed, all other activities. Therefore, the arguments about the amount the Treasury have received as a result of this higher Entertainment Duty in the past have no very great bearing on this new Clause, which is concerned with what it is likely to receive in the future. Past receipts are likely to be an extremely small guide to what is to come, because as my hon. Friend, too, said, the future of the theatre is unpredictable and nobody can tell for certain what will happen. There is, however, every sign and probability that at any rate the immediate future of the theatre of this country is likely to be a great deal less prosperous from the economic point of view than the past.
Its past has been prosperous for two quite accidental reasons; it has been partly because of the circumstances of the war—people coming home on leave tend to favour going to the theatre—and partly because, as the Chancellor has so often told us, we have been in a situation where we have had too much money chasing too few goods, and people have gone to the theatre just as they have read books and carried on various other activities because it was one of the comparatively few things they could do. In most other forms of entertainment, the more people indulge in them the more is consumed, but you do not consume any more actresses or any more dogs if you go to more theatres or more dog racing, and, therefore, these are industries or activities which flourish particularly in a time of shortage of goods.
5.45 p.m.
One of two things is likely to happen in future: things will either get worse or they will get better. Or, as my hon. Friend has said, they might stay as they are. I think they will either get worse or get better, but whichever happens it is likely to be to the disadvantage of the


theatre. If things get worse people will stop going to the theatre because they will not be able to afford it, and if things get better they will stop going to the theatre because they will be able to afford other things which will then be more plentiful. There is, therefore, every reason to think that the theatre in the future—in the near future at any rate—is in for a difficult time. Whatever the prospects, therefore, we are faced with the difficult question of whether the British theatre will survive. It is, surely, in the national interest that it should survive, and if £3½ million be the sum which the Chancellor receives as a result of the higher Entertainment Duty in the past year, it is far from certain that he would receive less than that sum by accepting this new Clause. In point of fact, it is extremely probable that with the present high rate of Entertainment Duty theatres will be playing to empty houses during the coming year, whereas with the lower tax, as proposed in this new Clause, they would be able to play to full houses, so that the Treasury would receive more money by accepting the new Clause than by rejecting it.

Mr. Dalton: I feel at a little disadvantage in speaking at this stage of the Debate, because three out of the four previous speakers are playwrights, though I do not think the hon. Gentleman who has just spoken has yet produced his first play. If all the playwrights had been unanimous, it would have been easier for me to reach a decision but the fact that my hon. Friend the Member for Eton and Slough (Mr. Benn Levy) considers—and gave good reasons for so considering—that the acceptance of this new Clause would be against the interest of the theatre which we all desire to forward makes my position a little difficult. In reply to the hon. Member for Devizes (Mr. Hollis) I say without any hesitation that of course we must all desire that British art and drama should survive and flourish, whether it be highbrow, lowbrow or middlebrow—and all types of production are known. To begin with the hon. Gentleman the Junior Burgess for Oxford University (Sir A. Herbert), who moved the new Clause. I was trying to puzzle out, as he proceeded, one or two arithmetical problems. I had been working on his article in "The Sunday Times," and I rather gather he now says that the figures are different.

Sir A. Herbert: The only thing was the question of the loss of £20,000.

Mr. Dalton: I had been looking at that article and trying to puzzle out some of the arithmetic of the economics of the theatre. I may perhaps be allowed to make one or two observations on that in a minute, but at the moment I do not quite agree with his arithmetic about the present rates which he is proposing to alter. I have tried to work it out with the aid of my advisers and, under the Finance Act, 1943, which is the relevant Act for this purpose, the present rates of Entertainment Duty represent about one-twenty-fourth of the admission price for is. seats, about one-fifth of the price for a 2s. 6d. seat and about one-quarter of the price for seats above 2s. 6d. I think that is correct and if so, it does not sound quite so formidable as he suggested. No doubt he can make a case—whether it is a good case or not we will discuss in a moment—for reducing those figures, but they do sound a little less formidable than the figures which he put to the Committee.

Sir A. Herbert: I think my figures were correct.

Mr. Dalton: I think my figures are correct, too. Perhaps the difference arises according to how one makes the estimate. I have worked out—and I think it is a fair way of approaching it—the proportion which the tax levied bears to the price of the seat.
I gave the figures that have been worked out and from them it can be seen that there is a substantial margin in favour of the living theatre as compared, for example, with the cinema. That was the intention—and the quite proper intention—of those who claimed this reduction. I would not for one moment depart from that, although I must admit that sometimes I am subject to severe pressure from those with a special interest in the cinema, and who tell me that the Entertainment Duty in regard to the cinema is too high. If I continue to resist them I must not do too much to widen the gap, which is deliberately created between the living stage and the canned performance—as I think it has been described earlier this afternoon —which comes from the cinema.
With regard to the figures in the article which the hon. Member for Oxford University wrote in the "Sunday Times," it appears that the manager—I will not


quote all the figures, though I have them here—got £1,100 towards recouping the production of his costs of £11,000 on this performance, and it also appears that after the expiration of the first 11 weeks, during which this shown ran, the manager made a profit of £1,100 a week. I think now that I am citing the figures as quoted in the "Sunday Times." I want to get the facts right, because it appeared from the hon. Gentleman's remarks that nobody was making anything at all from this performance.

Sir A. Herbert: There was a ten-weeks tour, during which £11,000 was paid to the State, but no profit was made. The cost of production was about £12,000. The running costs, weekly, were round about £3,000 The total amount paid by the public for 15 weeks in London averaged £5,800 a week, and the sum paid to the State weekly was about £1,700, leaving £4,100 to the manager. That sum for 11 or 12 weeks, was not a profit but was gradually recouping the manager for the costs of 'Abduction. There were 22 weeks in all in which he just got his money back, and just when there was a chance of making some money the production had to stop.

Mr. Dalton: I gather from the hon. Member, and also from the "Sunday Times" article, that the manager did make a reasonable profit in the second half of the period. I understood from the junior Burgess for Oxford University that he was speaking of a period when the show was running in London after being on tour. I understand that in the latter part of the period the manager was doing quite well and was making a considerable profit.

Mr. Levy: Eight hundred pounds a week.

Mr. Dalton: I called it £1,100 a week It was some hundreds a week.

Sir A. Herbert: It was not a profit; it was production costs.

Mr. Dalton: I am merely trying to follow the junior Burgess for Oxford University both in the article in the "Sunday Times," and in the speech to which we have listened today. However, it is of sufficient interest for us to be able to pursue the matter perhaps in a quiet hour later on. I want to understand the thing. I am not trying to evade or contradict it.

I have had these figures studied by my advisers, in the light of what the hon. Gentleman the junior Burgess for Oxford University had asked, but I am inclined to say that on the figures given, the manager did not lose money; on the contrary, he made a moderate number of hundreds of pounds a week on this particular performance.

Sir A. Herbert: I am sorry to interrupt the right hon. Gentleman again, for he has been very accommodating. There is a difference between making a profit and getting back capital costs. The sum of £1,100, which was coming in, was not profit, for there was a sum of £12,000 over the period which the play ran for the cost of production. Once that was met, there were two or three weeks when a profit was made, and then the profit began to descend until there was a slight loss. But all the weeks about which the right hon. Gentleman is talking there was not a profit being made, but the gradual recovery of money to replace that spent on the cost of production. I hope I have made my meaning clear.

Mr. Dalton: For all that, a profit was made and if this play had gone on for a few weeks longer a much larger profit would have been made. I only wish that it had gone on a bit longer, and I might have been able to accept the invitation which the junior Burgess for Oxford University extended to me. I do not want to labour the point, but it does not look as though the manager lost money. An author gets royalties on these artistic productions which is quite right and his due, but what I am wondering is, supposing we were to accept the new Clause in these terms, who would benefit by the distribution? My hon. Friend the Member for Eton and Slough spoke very forcibly about the great increase in rents. Supposing we were to accept this new Clause, I wonder whether the rents would be raised still higher as they do not come under the Rent Restrictions Act. In that case the author would not benefit, though, as was said by the hon. Member for Ashford (Mr. E. P. Smith) it is he who, after all, is responsible for the whole thing. I agree with him in that. It is not at all clear that the public would get any benefit either. The hon. Member for Devizes said it was hoped if these new scales were adopted that prices might be reduced, but


I do not know whether that is so. The whole argument of the hon. Member for Devizes was for a reduction in prices in order that more people should witness British drama, Shakespeare or whatever it may be. There is no assurance that prices would be reduced and the benefit of such a new Clause passed on to a wider field. If prices are not reduced, there can be no question of direct benefit to the public.
I was consulting with my right hon. Friend the Minister of Health, who is the Minister who would have to consider bringing into operation the suggestion of my hon. Friend the Member for Eton and Slough for the extension of the Rent Restrictions Act to the theatre. We thought perhaps that the Lord Chamberlain was involved in that, but since he is unable to answer for those matters in either House of Parliament except for censorship, it seemed to us that the Minister of Health, who is the Minister responsible for rent restrictions on business premises from the legal point of view, would be concerned with theatre premises, as they could be termed "business premises" within the meaning of that reference. There is no rent restriction at the present. I gather from my hon. Friend the Parliamentary Secretary to the Board of Trade that his Department would be responsible for the Rent Restrictions Act being applied to the theatre. The hon. Member for Eton and Slough wanted the Rent Restrictions Act applied to the theatre and a working party set up to examine the various points connected with the theatre, including the relative possibilities of the non-profit-making concern as against what are called the commercial companies. That is all by the way, but it is not entirely irrelevant because it has a bearing on what the effect would be if I accepted this new Clause. Whether it would benefit the playwrights and the public is something which is debatable.
Coming to the actual revenue from the theatre, it is common to be told that if taxation is reduced we shall be more than recouped for the loss of revenue by the additional income because of greater patronage. We have all put that argument from time to time. I see no reason to doubt that the estimate given to me is correct—namely, that if I accepted this new Clause I should lose nearly £3 million

a year. Quite frankly, I do not feel that that is reasonable at this time. We are at an early stage in the new Clauses and the Schedules are to follow. I must not say in advance anything which would be in Order on other tax reductions. Quite a lot of people want taxes reduced, as is not uncommon at this time of the passage of the Finance Bill, and there may be one or two points in which I may be able to oblige later on, but I do not think I can take off nearly £3 million extra here, particularly in view of the doubtful consequences which the acceptance of this new Clause would produce.
6.0 p.m.
On the other hand, I hope I am as keen as anybody on seeing British drama thrive and flourish. I am very anxious that we should do all we can to give assistance to the British living theatre in the years ahead, and although I cannot accept this new Clause now, I am quite sincere when I say that I should like to go into these figures more closely. I find perplexities and ambiguities about all these calculations. If it were an easier time and I found it possible to distribute some more revenue by way of tax reduction, I am sure that the living theatre would stand high on the list, provided that we could be sure of the consequences of making such a reduction What I should like to do would be to haw a discussion between now and next year between the hon. Gentleman himself, my hon. Friend the Member for Eton and Slough, who has great knowledge of the matter, and others, including the hon. Gentleman the Member for Ashford if he cared to join in. I should like as to constitute ourselves an unofficial working party, to consider what steps should be taken within the fiscal field—I must not trespass on the field of other Departments —to sustain and assist the British living theatre in the years to come. Of course, if an official working party could be appointed, perhaps they would do the work for us. I should be very happy to take part in an inquiry of the kind I have described, but I do not feel that I can accept this new Clause this afternoon.

Sir A. Herbert: I thank the right hon. Gentleman for the manner if not for the substance of his reply. May I tell him briefly what would be the effect of this new Clause—a point about which I am perfectly, clear? First, we should have a


better theatre. We should have managers who were more ready to take risks and produce British shows and less prone to scour the by-ways of New York where they obtain plays which are not always good. Anyway, they would be encouraged to help British art. Second, although I have no authority to speak for the managers, I have spoken to a number and they have all said that they would certainly bring prices down somewhat, although not always, perhaps, to the whole extent of the duty because then they might be as badly off as before. They might, however, reduce the 16s. seats to 14s., the 12S. 6d. ones to 10s. 6d. and so on. I know that they will do their best simply because it would help them to sell more seats and the public has now reached its limit.
Those are the two effects which I foresee. I have never before wished any particular harm to the Member for Eton and Slough (Mr. Levy), but I am bound to say that if he has as much influence as he appears to have with the Chancellor of the Exchequer with what I consider to be his wrong-headed ideas, I hope I may arrange for a discussion between the hon. Member and his horrible, profit-making, commercial manager—who is now paying him, I hope, very heavy royalties for his excellent play at Wyndham's Theatre. I should like the Chancellor of the Exchequer to come too. There is no reason why a man like Mr. Cochran, who has served the theatre for fifty years, should be limited to £25 a week. That is a condition of the non-profiteering racket. It is in many ways a racket, and that is one reason why Mr. Cochran and people like him are against it. One of the conditions, I understand, is that the manager is allowed not more than £25 a week. It is not merely a question of ploughing money back into the business. The real managers have been doing that all their lives and long before the hon. Member came here.
However, I do not want to embark upon a protracted quarrel about that. The simple point here is that on the one side there is the non-profit-making business and, on the other, the old-fashioned commercial managers who still prefer to go on conducting their businesses as they have done for years past. There is no law compelling them to go into this non-profit-making affair, so for goodness sake

let us say that we shall help them all we can. We are then told by the hon. Member for Eton and Slough, and by the Chancellor echoing him, that all that you would do then would be to assist the horrid landlords. I tried to make it clear that if the State takes £1,700 out of the till and the man who owns the theatre £500, though that may be excessive here and there, it is not necessarily so; because the State is providing nothing and risking nothing, but the landlord is at least providing the theatre and maintaining it; and it may cost some £15,000 a year to maintain a large theatre.
For these reasons, although the tone of the Chancellor's reply was sympathetic, I find its substance most disappointing. It amounts to saying, "Because there is a small ill here we will continue a major ill over there, and will do nothing whatever to rectify it." However, the right hon. Gentleman has promised to do what he can. I must say that I am disappointed and can only contrast his attitude to the managers with his attitude to the bookmakers, who, he said, were elusive people who would be difficult to tax. This tax is collected and calculated passively and sheepishly by the managers and handed over. The State has no work whatever to do. Law-abiding man though I am, I must say that if I had any influence with them I should be strongly tempted to advise them to say to the State, "You come and collect the tax. We will take you to the courts and claim that we are just as 'educational' as the show being put on across the road by the non-profit-making people and can see what the answer is." I am bound to say that in spite of the Chancellor's blandishments I shall take this new Clause to a Division.

Mr. Osbert Peake: Before my hon. Friend takes this new Clause to a Division perhaps I might express what must be a purely personal opinion on this matter because I think it is one which does not involve arty division on party lines. We have heard the case very fully argued. The playwrights themselves disagreed about the merits of a remission of the Entertainment Duty on the living stage. The hon. Member for Eton and Slough (Mr. Levy) feared that all the benefit of a remission might go to the landlords. My own view is that that would not happen, and that any remission of taxation on the living stage is bound


automatically to be divided between the management, the public and the employees of the theatres. [HON. MEMBERS: "No."] If that is not the case, then of course there is no argument at any time for a reduction in the tax upon any commodity. It will always be argued that if a tax is taken off a certain article, such as a motor-car the benefit will not go to the public or to the management but to the landlord. That would be a good argument against any reduction in taxation.
The hon. Member for Eton and Slough also referred to the fact that by becoming a non-profit-making society any manager could avoid the payment of Entertainment Duty, but if he will refer to the Section produced in the Finance Act last year which re-enacted the old exemptions with some slight differences, he will observe that only a limited class of living stage performances are covered by the exemption. For example, the music-hall does not come within the definiton of Section 8 (1) of that Act. One of the reasons why the rate of Entertainment Duty on the living theatre should be reduced at the present time is that a great racket has grown up round the exemptions granted to the non-profit-making societies. Nonprofit-making societies can pay their actors, their actresses and their managers any salary scale they please.

Mr. Levy: No. Impossible, the right hon. Gentleman is mistaken on that last point. It is at the discretion of the Customs and Excise, and their discretion is extremely acute. There are cases, I believe, where they have in fact withdrawn their exemption on the grounds that actors, actresses and managers have been receiving more than normal. As to the right hon. Gentleman's first point that the Section last year did not cover all kinds of entertainments, I quite agree. I suppose he was referring to the phrase about it being "partly educational." That is of course an uncommonly silly phrase. Nobody can decide what is or what is not partly educational, but in practice the common sense of the Customs and Excise has been such that they have not tried to discriminate as to what is or is not partly educational, and I hope they will not.

Mr. E. P. Smith: The Customs and Excise have told us explicitly that they have

no control over contracts, however exorbitant they may be.

Mr. Levy: They have no control but they are not obliged to grant exemption licences.

Mr. Peake: A racket was gum mg up when I was concerned at the Treasury some two years ago because the advantages of being a society of a non-profit making character were becoming so very great. The rate of duty, as the hon. Member for Oxford University (Sir A. Herbert) told us, averages about 40 per cent. on the price of the ticket clear of the Duty. There is, therefore, an enormous advantage and a burden of tax to be avoided if one becomes a non-profit making society. I am authoritatively told and it is borne out by what has been said by the hon. Member for Ashford (Mr. E. P. Smith) that very large numbers of non-profit-making societies are being formed at the present time and the sole purpose of so doing is to enable Entertainment Duty at this very high rate to be avoided and managers, actresses and, if you like, authors as well, to be remunerated at higher rates than they would otherwise be.

Mr. Levy: No.

Mr. Peake: The hon. Member may deny that, but my information is to the contrary. That is one of the reasons why I say that this peak rate of duty imposed in 1943 should now be reduced. Many other forms of tax have been reduced. This Entertainment Duty on the living stage stands at the highest rate at which it stood during the war. For that simple reason, if for no other, if the hon. Member for Oxford University decides to go to a Division, I shall support him in the Lobby. This duty might well be reduced. I think it should be reduced, and if it were to be reduced, in my opinion many good things would follow.

6.15 p.m.

Mr. Blackburn: As I signed this new Clause, though my name does not seem to be on the Order Paper, I would like to say that I very much regret that it is being carried to.a Division. It seems to me that the Chancellor of the Exchequer made a very conciliatory answer. The question of the non-profit making theatre is more or less irrelevant.


The issue is whether or not it is a desirable thing for the profit-making theatre to have a remission. I believe the arguments of the hon. Member for Eton and Slough (Mr. Levy) to be theoretically entirely unsound. If we are dealing with private enterprise—nobody has suggested that the theatre should not remain private enterprise—we must deal with it as an entity and believe that it would play the game. I believe that it is not going to play the game as much as it ought to As to the remarks made by an hon. Member about "one man, one theatre," I believe that to have 20 theatres in the same hands is a very dangerous thing.
I have been greatly impressed by a book by Mr. Aldous Huxley, "Science, Liberty and Peace." That book makes the point that we are living in a world in which, as a result of scientific and technological advances, more and more power is being placed in the hands of fewer and fewer people. That is directly

relevant to this issue. I hope that the Chancellor of the Exchequer in thinking this matter over will not be frightened of widening the gap between the films and the theatre. I am an ardent lover of the films, but it is a most dangerous development for the films to overshadow the theatre as they are tending to do today. I hope that whatever arguments weigh with the Chancellor, the argument of widening that gap will not weigh with him. I would say to the hon. Member for Oxford University (Sir A. Herbert) that even if he carries this to a Division, I am sure he will recognise that hon. Members on this side of the Committee are just as ardently anxious for the cause of the living theatre as hon. Members on the other side.

Question put, "That the Clause be read a Second time."

The Committee divided: Ayes, 99; Noes, 206.

Division No. 255.
AYES.
6.19 p.m


Assheton, Rt. Hon. R
Hinchingbrooke, Viscount
Nicholson, G.


Baldwin, A. E.
Hogg, Hon. Q.
Nutting, Anthony


Beechman, N A
Hollis, M. C.
Orr-Ewing, I. L.


Bennett, Sir P
Holmes, Sir J. Stanley (Harwich)
Peake, Rt. Hon. O


Birch, Nigel
Howard, Hon. A
Peto, Brig. C. H. M.


Boyd-Carpenter, J. A.
Hurd, A.
Pitman, I. J.


Braithwaite, Lt.-Comdr. J. G.
Hutchison, Lt.-Com. Clark (E'b'gh, W.)
Poole, O. B- S. (Oswestry)


Bromley-Davenpott, Lt.-Col. W
Hutchison, Col, J. R. (Glasgow. C.)
Ramsay, Maj. S.


Brown, W. J. (Rugby)
Jeffreys, General Sir G.
Rayner, Brig. R.


Buchan-Hepburn, P G. T
Joynson-Hicks, Hon. L. W
Reed, Sir S. (Aylesbury)


Byers, Frank
Keeling, E. H.
Roberts, Emrys (Merioneth)


Carson, E.
Lambert, Hon G.
Roberts, W. (Cumberland, N.)


Challen, C.
Law, Rt. Hon. R. K.
Robinson, Wing-Comdr. Roland


Clarke, Col. R. S.
Legge-Bourke, Maj. E. A. H.
Ropner, Col. L.


Clifton-Brown, Lt.-Col. G
Lennox-Boyd, A. T.
Salter, Rt. Hon. Sir J. A.


Conant, Maj. R. J. E.
Lindsay, M. (Solihull)
Shepherd, W. S. (Bucklow)


Crookshank, Capt. Rt. Hon H. F. C.
Linstead, H. N.
Spearman, A. C. M.


Crosthwaite-Eyre, Col. O E
Lipson, D. L.
Stanley, Rt. Hon. O


Crowder, Capt. John E.
Low, Brig. A. R. W
Stewart, J. Henderson (Fife, E.)


Cuthbert, W. N.
Lyttelton, Rt. Hon. O
Stuart, Rt. Hon. J (Moray)


Darling, Sir W. Y
Macdonald, Sir P. (I. of Wight)
Studholme, H. G.


Davies, Clement (Montgomery)
Mackeson, Brig. H. R
Taylor, C. S. (Eastbourne)


Digby, S. W.
Maclay, Hon. J. S.
Thornton-Kemsley, C. N.


Donner, Sqn.-Ldr, P. W.
Macmillan, Rt. Hon. Harold (Bromley)
Thorp, Lt.-Col. R A. F


Drewe, C
Macpherson, N. (Dumfries)
Touche, G. C.


Eccles, D. M.
Maitland, Comdr J. W.
Wadsworth, G


Elliot, Rt. Hon. Walter
Marples, A. E
Wakefield, Sir W. W


Fraser, H. C. P (Stone)
Marshall, D. (Bodmin)
Walker-Smith, D.


Fraser, Sir I (Lonsdale)
Mellor, Sir J.
While, J. B. (Canterbury)


Gage, C.
Morris, Hopkin (Carmarthen)
Williams, Gerald (Tonbrldge)


George, Maj. Rt. Hn. G. Lloyd (P'ke)
Morrison, Maj. J. G (Salisbury)
Willoughby de Eresby, Lord


Gridley, Sir A.
Morrison, Rt. Hon. W S. (C'nc'ster)



Hare, Hon. J. H. (Woodbridge)
Mott-Radclyffe, Maj. C E
TELLERS FOR THE AYES:


Harvey, Air-Cmdre. A V
Neven-Spence, Sir B
Sir Allen Herbert and




Mr. K. P. Smith.




NOES.


Adams, Richard (Balham)
Bacon, Miss A.
Sevan, Rt. Hon. A. (Ebbw Vale)


Allen, A. C. (Bosworth)
Balfour, A.
Binns, J


Allighan, Garry
Barnes, Rt. Hon. A.[...]
Blackburn, A. R


Alpass, J. H.
Barstow, P. G.
Blenkinsop, A.


Attewell, H. C.
Battley, J. R.
Blyton, W. R.


Austin, H. Lewis
Bechervaise, A. E
Bottomley, A. G


Awbery, S. S.
Benson, G
Bowles, F. G. (Nuneaton)


Ayles, W H
Berry, H
Braddock, Mrs. E. M. (L'pl. Exch'ge)


Ayrton Gould, Mrs. B
Beswick, F
Braddock, T (Mitcham)




Brook, D (Halifax)
Harbison, Mist M
Pryde, D. J.


Brooks, T. J. (Rothwell)
Holman, P.
Pursey, Cmdr. H


Brown, George (Helper)
Holmes, H. E. (Hemsworth)
Ranger, J.


Brown, T. J. (Ince)
House, G
Rees-Williams, D. R.


Bruoe, Maj. D. W. T
Hoy, J.
Reeves, J.


Burden, T. W
Hudson, J. H. (Ealing, W.)
Reid, T. (Swindon)


Burke, W. A.
Hughes, Hector (Aberdeen, N.)
Richards, R.


Butler, H. W. (Hackney, S.)
Hughes, H. D. (Wolverhampton, W.)
Robens, A.


Champion, A. J.
Isaacs, Rt. Hon. G. A.
Rogers, G. H. R


Chater, D.
Jay, D. P. T.
Royle, C.


Chetwynd, G. R.
Jeger, G. (Winchester)
Sargood, R.


Cluse, W. S.
Jeger, Dr. S. W. (St. Pancras, S.E.)
Scollan, T.


Cocks, F. S.
Jones, Elwyn (Plaistow)
Shawoross, C. N. (Widnes)


Coldrick, W.
Key, C. W.
Shurmer, P.


Collindridge, F.
Kinley, J.
Silverman, S. S. (Nelson)


Collins, V. J.
Lang, G.
Simmons, C. J.


Colman, Miss G. M.
Lee, F (Hulme)
Skeffington, A. M.


Comyns, Dr. L.
Lee, Miss J. (Cannock)
Smith, C. (Colchester)


Cooper, Wing-Comdr. G.
Leslie, J. R
Snow, Capt. J. W


Corlett, Dr. J.
Levy, B. W
Soskice, Maj. Sir F.


Cove W. G.
Lewis, A. W. j (Upton)
Sparks, J. A.


Crossman, R. H. S.
Lewis, J. (Bolton)
Stamford, W.


Daggar, G.
Lipton, Lt.-Col. M.
Stewart, Michael (Fulham, E)


Daines, P.
Longden, F
Summerskill, Dr. Edith


Dalton, Rt. Hon. H.
Lyne, A. W
Sylvester, G. O.


Davies, Edward (Burslem)
McAdam, W.
Taylor, H B. (Mansfield)


Davies, Ernest (Enfield)
McEntee, V La T
Taylor, R. J. (Morpeth)


Davies, Hadyn (St. Pancras, S.W.)
McGhee, H. G
Thorneyoroft, Harry (Clayton)


Davies, R. J. (Westhoughton)
Mack, J. D.
Thurtle, Ernest


Dobble, W.
McKay, J. (Wallsend)
Tolley, L


Dodds, N. N
Macpherson, T. (Romford)
Turner-Samuels, M.


Driberg, T. E. N.
Mainwaring, W. H.
Vernon, Maj. W. F


Dumpleton, C. W.
Mallalieu, J. P. W.
Viant, S. P.


Dye, S.
Manning, Mrs. L. (Epping)
Walkden, E.


Ede, Rt. Hon. J. C
Marshall, F. (Brightside)
Wallace, G. D. (Chislehurst)


Edelman, M.
Martin, J. H.
Wallace, H. W. (Walthamstow, E.)


Edwards, N. (Caerphilly)
Mathers, G.
Warbey, W. N.


Edwards, W. J (Whiteckapel)
Mayhew, C. P.
Weitzman, D.


Ewart, R.
Middleton, Mrs. L.
Wells, P. L. (Faversham)


Fernyhough, E.
Mikardo, Ian
Wells, W. T. (Walsall)


Field, Captain W. J.
Millington, Wing-Comdr E. R
West, D. G.


Follick, M.
Mitchison, G R
White, H (Derbyshire, N.E.)


Foot, M. M.
Moody, A. S.
Whiteley, Rt. Hon. W.


Forman, J. C
Morgan, Dr. H. B.
Wilcock, Group-Capt. C. A. B


Ganley, Mrs. C. S.
Morley, R.
Wilkins, W. A.


Glanville, J. E. (Consett)
Morris, P. (Swansea, W.)
Willey, F. T (Sunderland)


Goodrich, H. E.
Mort, D. L.
Willey, O. G. (Cleveland)


Greenwood, Rt. Hon. A. (Wakefield)
Moyle, A.
Williams, D. J. (Neath)


Greenwood, A. W. J. (Haywood)
Neal, H. (Clayoross)
Williams, J. (Kelvingrove)


Grenfell, D. R.
Nichol, Mrs. M. E. (Bradford, N.)
Williams, W. R. (Heston)


Grierson, E.
Nicholls, H, R. (Stratford)
Willis, E.


Griffiths, D. (Rother Valley)
Noel-Buxton, Lady
Wills, Mrs. E. A.


Gunter, R. J.
Orbach, M.
Wise, Major F. J


Guy, W. H.
Palmer, A. M. F.
Woodburn, A


Haire, John E. (Wycombe)
Parkin, B. T.
Woods, G. S.


Hale, Leslie
Paton, J. (Norwich)
Yates, V. F.


Hall, W. G.
Pearson, A.
Zilliacus, K.


Hamilton, Lieut-Col. R.
Peart, Thomas F.



Hardy, E. A
Platts-Mills, J. F. F.
TELLERS FOR THE NOES:


Harrison, J.
Porter, E. (Warrington)
Mr. Joseph Henderson and


Haworth, J
Proctor, W. T
Mr. Hannan.

NEW CLAUSE.—(Repeal of stamp duty on articles of clerkship for solicitors.)

So much of the Stamp Act, 1891, as imposes a stamp duty of eighty pounds on articles of clerkship under the Solicitors Acts is hereby repealed.—[Mr. S. Silverman.]

Brought up, and read the First time.

Mr. Sydney Silverman: I beg to move, "That the Clause be read a Second time."
This is a very different Clause from the previous one. We have just been discussing a tax on entertainment. This duty of £80 is a tax on education, and I hope I may be able to persuade my right hon. Friend to accept the Clause.

It is completely non-controversial in the sense that no one who has looked into the matter has ever been able to conceive any rational reason why this duty should stand. It is inequitable because it imposes a penalty, and a very heavy penalty, on a youth who desires to enter one of the learned professions. Finally, it is a duty which my right hon. Friend could give up on either or both of those grounds without involving himself in a loss of revenue which he might feel compelled to make up elsewhere. I am not sure what the figures are, but, on the basis that 500 clerks are articled every year, the total sum involved is £40,000.
How does the duty work? The Stamp Act provides that a boy who enters into articles of clerkship with a solicitor, with the ultimate intention of practising as a solicitor and being admitted on the roll, has to pay a duty of £80 to the Chancellor of the Exchequer for the privilege of being educated as a solicitor. I have heard it justified on the ground that you ought not to have too many entrants into the profession. I have heard other trade unionists argue that, and, therefore, I make no apology for my profession having thought that there ought not to be too many entrants into it. But whether or not there ought to be a limit or a tax on the entrance to the profession, surely no one in this Committee can think of a more inequitable method of selection than the question, "Have you got £80 which you can afford to give to the Chancellor of the Exchequer?" It is wholly unreasonable.
6.30 p.m.
I have heard it asked, "Why bother about £80 the you pay the Chancellor of the Exchequer, in view of other expenditure, particularly the high premium you pay to the solicitor to whom you are articled?" I think on the whole that premiums in the profession are too high, and justification on the ground that would limit the entrants to the profession is every bit as bad as ground for retaining the £80. The profession ought to make great effort to reduce premiums, and to return, at any rate, a portion over a period of five years in return for services rendered. There is this to be said in distinction, however. The solicitor who takes the premium does do something for the money—

Mr. Rees-Williams: Sometimes.

Mr. Silverman: —whereas the Chancellor does not. I think the solicitor does do something, and I am not sure that the solicitor who allows the clerk free use of his office is not doing a good turn to the clerk. What I think is completely outrageous is the idea that if a man or his father pays £80, somehow or other a high standard of probity and integrity can be produced in the profession. What I cannot understand is how the fact that the father paid £80 to the Chancellor of the Exchequer when one was 18 affects one's professional conduct 20 or 30 years later. Arguments in favour of the duty seem to me to be wholly artificial and

completely non-maintainable. The duty itself seems to be inequitable, anti-social, against public policy, and certainly against public policy in these times. The learned professions ought to be equally accessible to boys and girls without great means, as they are to people with great means. Anything this Government can do to liberalise the learned professions in that way will be a step—perhaps only a small one—in the right direction.

Mr. Rees-Williams: I wish to support the contention made by my hon. Friend the Member for Nelson and Colne (Mr. S. Silverman). This impost has always seemed to me to be entirely reactionary. It was imposed, I take it, because in the old days people wanted to keep the profession select, and to keep it for a certain narrow class of the community, and not to throw it open to the best brains in the community as a whole. I cannot think of any other reason for the duty because, as has been so lucidly explained by my hon. Friend the Member for Nelson and Colne, the amount which can accrue to the Exchequer in any year must be very small indeed.
There is another objection to this duty and that is that it stands in the way of the rationalisation of the legal professions of this country. Ours is the only country in the world still maintaining two legal professions, quite separate, with different types of legal education, and with very little connection between them until they come to the fee basis. I hope that in the course of time there will he one profession, at all events right up to the final examination, as is the case in practically every country in the world, and that boys and girls who go into this one profession will take the same examinations right up to the final stage. These boys and girls who go into the profession must have the best brains in the country among them. As we have seen, in so many cases those with the best brains have not always the best lined pockets. Therefore, we must take away from the initial fence this added bar of monetary impost. The case against this duty is so self-evident to hon. Members that it would be a waste of time to say much more about it, and, therefore, I merely commend the new Clause to the Committee.

Mr. Dalton: I do not know why this proposal has not been made before. I


have not searched all the previous records, but, speaking from memory, I do not remember having heard of it, and I have sat through a number of finance Debates on both sides of the House. This year we are increasing the Stamp Duty on a number of transactions. I have conceived the case for that increase to be that a number of transactions in sales of stocks and shares and landed property, and so on, were, in our financial situation, a suitable field in which to collect a little more money. But this, although it falls within the field of Stamp Duty, is a quite different kind of tax, and is, as my hon. Friends have said, one which operates to hinder people with ability but with not over-much wealth, entering this particular branch of the legal profession. Not only am I surprised that this proposal has not been made before, but that other similar cases have not also been taken up by hon. Members, including those who represent the other branch of the legal profession.
The issue before us is a very simple one. It is a proposal that this duty of £80 on articles of clerkship under the Solicitors Acts should be repealed. I think it is in line with educational ideas today that we should achieve equality of opportunity based on ability, rather than inequality of opportunity based on wealth in the activities of the learned professions. Had other new Clauses been put down—and there are other such cases—on comparable imposts, I would have looked at them with a sympathetic eye. I am convinced by the case which has been made that there should be a change in this regard. Perhaps a sheer and straightforward repeal might lead to anomalies. Probably the way to handle this would be to assimilate this charge to the charges now made on other instruments of apprenticeship; that is to say, there should be a rate of half a crown, which would keep it in line with other cases. Although there is nothing on the Order Paper today regarding comparable imposts, I would take the same line if those were hereafter brought forward. I do not think it is my duty to encourage hon. Members to bring these things forward, but those speaking for the solicitors are entitled to pride in their initiative. If my hon. Friends will not press this particular form of words to a Division, I should be very happy to put down

a new Clause on Report which will give effect to what is desired, and which will repeal this charge, and substitute there-for a charge of 2s. 6d., as in other forms of apprenticeship.

Mr. Stanley: I am sure that everyone in the Committee welcomes the decision which the Chancellor has reached in regard to this duty. Indeed, I thought the hon. Member for Nelson and Colne (Mr. S. Silverman) made out an overwhelming case against it. I was a little shaken by the hon. Member for South Croydon (Mr. Rees-Williams) because he put it wholly on the basis that this would lead to a combination of the two branches of the profession. I noticed a shudder go through the hon. and learned Gentleman who sits on the hon. Member's right. I rise, therefore, not to question the decision which the Chancellor has taken on this new Clause, but to question very strongly his attitude to what he calls the comparable case. The Chancellor is approaching this matter as if it were a game, it might be "Kiss-in-the-ring," or whatever you like, and because the hon. Member for Nelson and Colne has been so agile and so quick, he is to get the prize.
But questions of taxation are not a gamble. It is true that the hon. Member for Nelson and Colne has—and we give him all the credit—exposed one hardship that occurs. In the course of examining that hardship, the Chancellor of the Exchequer has come across other comparable ones. [Interruption.] He said so. The hon. Member for Nelson and Colne thinks I am wrong, but for the moment I must reluctantly accept the authority of the Chancellor that there is at least a prima facie case. If the right hon. Gentleman has come across a comparable hardship, it is his duty, at a later stage, to put down an Amendment to rectify it. It is not good enough to say, "I know there are hardships; try to guess them, and if you can do so by the time we reach the Report stage I will see what I can do. You cannot get the first prize—my hon. Friend the Member for Nelson and Colne has already got that—but you might get the consolation prize." I do not think that is the way to approach this subject, and I am sure that, on reflection, the right hon. Gentleman will feel the same. He cannot depend upon there being a representative of a particular profession in the House, and he cannot—and


it is not right that he should—depend on that particular representative taking up the particular point. If the right hon. Gentleman has in his mind comparable hardships to this one, I submit that it is his duty, on Report stage, because he is to put down something on Report stage to meet the point which is now before us, to remedy these comparable hardships, as he is, in this case, remedying one which has already been brought to his attention. Frankly, I think it will be enough satisfaction for the junior branch of the legal profession to have got ahead of the senior branch, apparently, in doing something which will redound to their financial advantage, without emphasising that moral superiority by imposing a further financial penalty on the senior branch of the profession.

Mr. S. Silverman: I do not quite know who the right hon. Gentleman the Member for West Bristol (Mr. Stanley) had in mind when he referred to the junior branch of the profession. Certainly, it could not have been mine, because mine is the older of the two. Nor do I think I ought to allow to go without challenge any suggestion that there is any financial advantage to any solicitor in the new Clause I have moved. I wish there were. Nothing would please me better than to get my £80 back, but I think that is unlikely, and I am not optimistic enough to ask the Chancellor to do that. I would like to say a word about comparable cases, and to assure the Committee that I was not seeking, in this new Clause, to make a small or partisan case in any way. If there are cases analogous to this, neither I nor any of my hon Friends would think they ought to be excluded because we happened to think of it first.
6.45 p.m.
In fact, with deference to my right hon. Friend, I do not think there are corn-parable cases. This is not the case of a duty paid on admission to a profession. We pay that anyhow at the end of the five years. At the end of the examinations we still pay to the Chancellor £25 for admission to the profession, and thereafter we pay to the him a Stamp Duty of, I think, £7 a year for our practising certificate. I have made no suggestion about any of these. Are there comparable cases in other professions? I know of no other profession except that of a solicitor where, as a condition of entry—not to the

profession itself, but the right to study in order to become, at a later stage, a member of the profession—one has to pay, not merely a nominal fee, such as the apprentice does for his articles of apprenticeship—of 2s. 6d., but £80. If there are comparable cases, my right hon. Friend might well consider whether he should not include them. As I say, I do not know of any comparable cases. I want to say a word of great gratitude to my right hon. Friend for having met us on this point. We are really very grateful. In view of what he has said, I beg to ask leave to withdraw the Motion.

Mr. C. Williams: No. I object to the habit which has grown up on the part of hon. Gentlemen opposite to seek to deprive hon. Members on this side of the Committee, who occasionally wish to speak on a subject, from doing so. The hon. Member for Nelson and Colne (Mr. S. Silverman) gets up and asks leave to withdraw the new Clause before I have had a chance of congratulating him on his victory over the Chancellor. It would have been most untimely if I had not done so. Today, at any rate, he is getting his own way. I would also like, very respectfully, to support what has been said by my right hon. Friend the Member for West Bristol (Mr. Stanley). This is really a most extraordinary position—the Chancellor saying that no one has ever thought of this particular anomaly, and That if someone else connected with the legal profession finds some similar anomaly, then he will think of it, possibly in a friendly way, on the Report stage. Apparently, as my right hon. Friend said, the Chancellor knows what those anomalies are. Frankly I am not surprised, because I have never suspected the right hon. Gentleman of being one of those people who, when he knows that things are going on which, by accepting the principle of this new Clause, he admits are wrong, will necessarily go out of his way to get it put right. I am not surprised that that is the position.
If there is any crying injustice in a matter of this kind, if a sum of this sort is being paid, as I believe is the case, and if the Chancellor knows of it, he should not leave it to the private Member to hunt it down. When he has got as far as that in his knowledge, he should put down, on the Report stage, a compre-


hensive Clause which deals with the whole matter, and clean it up. The only reason I was a little doubtful about the Clause was because the Chancellor has been so busy warning us that he could not make this or that concession, in one instance a concession so small that it was not even worth estimating. Yet the right hon. Gentleman, in accepting this, said there might be something like £40,000 a year involved in the surrender of taxation, and he referred to other instances which might amount to a considerable sum. It shakes my belief in the Chancellor, when he gets up from time to time and says he cannot afford these other reliefs which, for all I know, may be very much smaller in their cost. In my last words I would like to say that I believe I have found a solution. Although the Chancellor of the Exchequer is not a very kind man, he has a very soft heart with solicitors.

The Deputy-Chairman: Does the hon. Gentleman ask leave to withdraw?

Mr. S. Silverman: Mr. S. Silverman rose—

Mr. Stanley: He cannot withdraw now.

Mr. Silverman: On a point of Order. We are in Committee. I think it would be in Order to speak again, and if I speak again I shall ask leave to withdraw the new Clause.

Mr. Williams: If that is so, I shall speak again and object to a withdrawal.

Mr. Dalton: Perhaps we could save time if withdrawal is not admitted. I would suggest that the question could be put and negatived.

Mr. Godfrey Nicholson: Was the Chancellor just teasing the Committee when he seemed to imply that he knew of other crying injustices?

Mr. Dalton: I did not say "crying."

Mr. Nicholson: I have a very high opinion of the Chancellor of the Exchequer. I believe that he would willingly correct his statement if it was wrong. His iron manner hides an upright heart. Does he know of any other cases? I challenge him to tell us.

Mr. Dalton: It would be out of Order if I went too far. What we are now discussing is a proposal put down by the

hon. Member for Nelson and Colne (Mr. S. Silverman). The purpose of our Committee discussion surely is that hon. Members in all parts of the Committee should make proposals to the Government. The Government make their initial proposals in the Finance Bill, and the purpose of the Committee stage is for hon. Members to make proposals to the Government. Some are accepted; some are not. It is not the function of the Government in the course of the Committee stage to think up a new Clause supplementing this proposal.

Mr. Nicholson: Why did the right hon. Gentleman dangle these hypothetical cases under our very noses? The Chancellor introduced the subject and he should tell the Committe whether or not he was pulling our legs.

Mr. Stanley: I must protest against the last defence of the Chancellor. I do not think that he really means it. If nobody got up and said that it was nonsense, it might go on record as his considered view. Of course, he knows perfectly well that the Committe stage is used both by back bench Members for putting ideas before the Government, and for the Government on their own initiative to correct something which they wish to correct. If hon. Members look through our proceedings for last week, they will find several instances where the Government, of their own initiative, put down Amendments to correct something which occurred to them between the drafting of the Bill and the Committee stage. In this case, the right hon. Gentleman in accepting, rightly, the hon. Gentleman's new Clause, went out of his way to tell the Committee that there were other comparable cases, and he could not think why people had not put down Amendments dealing with them before. He went on to hint at one of them in regard to the profession of barrister. I imagine that there will be a rush as soon as the Committee stage is over of banisters anxious to put something down. He said that if somebody put them on the Order Paper by the Report stage he would be prepared to meet them. I submit that that is all wrong.
If the right hon. Gentleman knows of a case he ought not to leave it as a sort of test to the Members of the Committee to see whether they think of it also. If somebody thinks of it, then the profes-


sion, who may not be well represented in the Committee, will get the benefit of it. If nobody thinks of it, then it is too bad. But it will not be hon. Members who have not thought of it who will suffer; it will be the profession which the right hon. Gentleman has in his mind, but about which nobody else has thought. I beg him not to treat the Committee in that way. If he really has—and I do not think he would have mentioned it if he has not—any comparable hardship, he should take the initiative himself on Report stage to clean up the whole of the matter. When he brings in a new form of this Clause he will also give hon. Members an opportunity of dealing with the other cases he has in mind.

Mr. Hopkin Morris: I would agree with the appeal of the right hon. Gentleman the Member for West Bristol (Mr. Stanley) if I thought the Chancellor really had something in mind comparable to the new Clause which stands in the name of the hon. Member for Nelson and Colne (Mr. S. Silverman).

Mr. C. Williams: He said he had.

Mr. Hopkin Morris: I do not think that he has. I heard him say that he had, but I think he was making a mistake or probably it was a joke. Whether or not it was a joke. I cannot think of anything comparable to this tax now imposed upon o young man entering the solicitors' profession. As far as I know, there is no tax comparable to it in connection with the senior part of the profession. In spite of what the hon. Member for Nelson and Colne said, it is the senior branch. There is a tax at a later stage on admission to the profession of barrister and there is a similar tax upon admission to the solicitors' profession but, as far as I know, there is not a tax upon the initial stage when a man wants to enter as an articled clerk. I think the Chancellor was making a mistake about that. If the Chancellor did know of a similar position, I agree with the appeal which was made. The matter ought not to be left to chance. If there is such a case, clearly it is the duty of the Chancellor of the Exchequer to put down an Amendment upon Report stage.

Mr. Dalton: Perhaps we may clear the matter up. I am doubtful if am in Order, but if the Chairman will allow me, I would say that possibly "comparable"

was not the word which conveyed my meaning. There is nothing strictly comparable in that this charge, the removal of which I am prepared to agree to, is at the earlier stage prior to entry into the profession. It is an apprenticeship, as I said. I do not want to split hairs. What I had in mind when I used the word "comparable" was that there are certain other charges which may be compared with this in that they are also, in some degree, levies, as the hon. Gentleman said, upon entry into the learned profession. This is at the earliest stage, prior to entry in order to be qualified to enter. There are certain other charges which are levied—I have them before me here—

Mr. Hopkin Morris: If the hon. Member for Nelson and Colne put down an additional new Clause not merely to deal with entry as an articled clerk, but to abolish the duty upon entry into the profession, where there was a comparable case between the solicitor and the barrister, would the right hon. Gentleman be prepared to consider that?

Mr. Dalton: That is hypothetical. I am considering the new Clause which is on the Order Paper. When I said that there were others that were comparable, what I had in mind was that there were others of the same character in so far as in the solicitors' profession, at a later stage, there is an entry fee, into the barristers' profession there is an entry fee, and so on. There are one or two others of lesser importance. There is a charge also for notaries public in England and Scotland, and others not quite in the same field but again, in a very loose sense, comparable. There is a fee charged when doctors become fellows of the College of Physicians. These are all obstacles for entry into certain learned professions and, as such, some part of the argument employed this afternoon may be employed there, though not with the same force as when applied to this new Clause.
I am sorry that the use of the word "comparable" has, perhaps, resulted in some misunderstanding and extension of our discussion. I do not think myself that there is any other case so strong. Therefore, I do not feel it part of my duty because my hon. Friend has put this down, to go one further and put down others. I do not say that I would pass them on some later occasion. I do not put them in at all a high priority. If they were to get


high priority, and here I repeat what I said before, I am quite sure that persons with the knowledge of the professions concerned would have taken the initiative and have put them down.

7.0 p.m.

Mr. Stanley: All I have to say to that is that we shall accept the invitation of the right hon. Gentleman and we shall put down all these Amendments on the Report stage.

Mr. Dalton: All right, good luck.

Mr. Stanley: I understood, from what the right hon. Gentleman said, that if anybody put them down, he will accept them. [HON. MEMBERS: "No."] Well, I shall ask hon. Gentlemen to read it in HANSARD tomorrow, and I am sure that the words reported in HANSARD will be the words spoken by the Chancellor. If these cases are quite comparable, and the Amendments are put down and the Chancellor is not going to accept them, I do not see why he ever introduced them into the discussion at all. Certainly, my impression was that he introduced them because he said they were comparable cases, concerning which, if the Amendments were put down, he would be willing to accept them. We shall certainly take him at his word and put down these Amendments.

Mr. James Hudson: if it be true that the Chancellor has been mistaken about this matter, I am quite certain that the Opposition are very much more mistaken in the policy they are now pursuing. It is an astonishing claim that it is the business of the Chancellor to initiate questions involving the use of public money in this or any other way. It is the business of the Chancellor, as indeed of all treasurers where funds are concerned, to be extremely careful in the way they are handled, and, while it may be perfectly justifiable, as a matter of theory to say, as the Chancellor has said, that there are cases here and there to consider remission of taxation, it is not the business of the Chancellor of the Exchequer in the Finance Bill to initiate proposals for making further remissions of taxation. The hon. Member for Nelson and Colne (Mr. S. Silverman) made out a case, and there ought to be some hon. Members who are sufficiently clear about the Committee stage who can, if there are

other matters where further remissions could be made, come forward and propose them in a similar sort of way. I think the Chancellor is right in resisting, at this stage, at any rate, any further incursions in the direction which the Opposition are now trying to impose upon him, and I am surprised that the Opposition are trying to make a new financial rule placing upon the Chancellor of the Exchequer the duty of remedying all possible theoretical injustices in financial arrangements in the way that they are now suggesting. I am quite certain that the Chancellor is right in refusing any further concessions.

Mr. S. Silverman: It seems to me to be rather a pity that what looked like being a very happy party should be spoiled by a somewhat—I hope I say it without offence—grudging and ungracious response from the Opposition to a proposal which, after all, has been accepted by my right hon. Friend. The fact that the Chancellor did refer to cases which might be covered in part by the principle of this new Clause, although not completely comparable in other ways, might justify hon. Members in asking whether there are any other cases into which they might like to make an investigation among themselves. After all, this particular one, and indeed all the others, whether comparable or not, have been in existence for a very long time, and, if it is really true, as the right hon. Gentleman opposite said, that the Chancellor ought to look round and find injustices of this kind and cure them without the initiative of hon. Members in this Committee, then there have been a long line of Chancellors of the Exchequer before my right hon. Friend who omitted to perform that duty.

Mr. Stanley: If I might interrupt the hon. Gentleman, may I say that that was not the point at all? The whole point is that the Chancellor has said that he has not got to look round, because he knows these particular hardships exist, and that if we find, in these circumstances, cases in which such hardships do exist, he is prepared to remove them. It ought not to depend upon the chance of some hon. Member hitting upon that case and putting down the right Amendment.

Mr. Silverman: Since everybody in the Committee, on both sides, is completely satisfied that this particular injustice ought


to be put right, and since the Chancellor of the Exchequer is prepared to put it right, one might have thought that all we need say was, "Thank you very much," and leave the position where it is, so that, if there are other matters to be considered we could consider them when they are taken. I cannot myself see a distinction in principle between a moderate duty paid on entering a profession, or a moderate annual charge to enable one to continue to practise, and a tax on apprenticeships. May I now ask leave to withdraw the new Clause?

Mr. Nicholson: On a point of Order. I would not presume to teach you your business, Mr. Beaumont, because you know it much better than I do, but is it not the practice that, when leave to withdraw has been once refused by the Committee it cannot be asked for again?

The Deputy-Chairman: The hon. Gentleman is in error. The leave is given or refused not upon the question but by the Chair taking the feeling and pleasure of the Committee. The Committee did not refuse leave to the hon. Gentleman to withdraw the new Clause. That would not be done until the question is put, and that question has not yet been put. Then, leave can be refused, but I have not yet put that question.

Mr. I. J. Pitman: It seems to me that we have here two principles—the principle of the taxation of education and the principle of the taxation of vocation, and the hon. Member for Nelson and Colne (Mr. S. Silverman) and the hon. and learned Member for. Carmarthen (Mr. Hopkin Morris) were perfectly right in saying that there was nothing strictly comparable in the taxation of education with the apprenticeship form of education. The Chancellor of the Exchequer has said two things. First, that he agrees that, in cases of this kind, in which there is taxation of education, it should, as in the case of solicitors, be abolished. He has also said that, as far as he knows, there are other cases of that kind, and he extends it to the case of taxation of vocation. In other words, people should be free to enter a vocation on merit and ability and not on the amount of money they may put up. The right hon. Member for West Bristol (Mr. Stanley) has said that, if that is agreed, the Chancellor should work out the details in doing what

is right in support of that principle. I think the hon. Member for West Ealing (Mr. J. Hudson) has said that it is not the duty of the Chancellor, as keeper of the money bags, to do this himself. I think that the Committee as a whole will agree that, where matters of principle of this kind are agreed, it is the duty of the Government to work out the details and give all taxpayers a square deal all round, so that it is not only one profession that benefits, but all the people in this nation who are entitled to benefit. I appeal to the Chancellor to let the Committee know what are the cases in which he will apply that principle.

Mr. C. Williams: We have been admonished, possibly quite rightly, because we ventured our opinion that when the Chancellor knew of an injustice he should put it right, and our attention was drawn to the fact that in Committee it is the Chancellor's duty to look after the public finances. It has also occurred to me that it is part of the duty of the Opposition, when a concession is made, to try to find out what that concession will cost, no matter how good or how bad it is. I have already put that question to the Chancellor, and if he had answered it we should have passed this point a long while ago. If the right hon. Gentleman makes a concession of this kind, which, obviously, he came thoroughly prepared to make, surely he is able to tell us something about the approximate cost to the taxpayer. I will not follow the right hon. Gentleman at any great length into his other arguments, but I would also like to know what will be the cost to the taxpayer of this new Clause. I hope the right hon. Gentleman can give me an answer to one or both of those questions, and after that I hope the Opposition will not be provoked by some other supporter of the Government into making more speeches. Hon. Members opposite always try to do that. I endeavour to resist the temptation, but it is a little hard sometimes.

Mr. Dalton: I am sorry I did not state the cost, but in the course of my remarks was led off on to another course. The cost of the new Clause is £100,000 a year.

Mr. C. Williams: In other words, it will be much larger than the estimate of the hon. Member for Nelson and Colne (Mr. S. Silverman) who, I believe, estimated the cost at £40,000. If we can give this remission to able-bodied people, it seems


very hard if we cannot make any remission in respect of the blind.

Motion and Clause, by leave, withdrawn.

NEW CLAUSE.—(Expenses to be deducted from emoluments assessed under Schedule E of First Schedule to Income Tax Act, 1918.)

For paragraphs 9 and so of the Rules applicable to Schedule E of. the First Schedule to the Income Tax Act, 1918, there shall be substituted the following paragraphs:

9. In computing the tax payable by any holder of an office or employment of profit there may be deducted from the emoluments to be assessed:

(a)such expenses of travelling in the performance of the duties of the office of employment, or of keeping and maintaining a horse or other means of conveyance to enable him to perform the same, as he is necessarily obliged to incur and defray;
(b)any disbursements or expenses being money wholly and exclusively laid out or expended' for the purpose of such office or employment.

10. Where the Treasury are satisfied with respect to any class of persons in receipt of any salary, fees or emoluments payable out of the public revenue that such persons have laid out and expended money wholly and exclusively in the performance of the duties in respect of which such salary, fees, or emoluments are payable, the Treasury may fix such sum, as in their opinion represents a fair equivalent of the average annual amount laid out and expended as aforesaid by persons of that class; and in charging the tax on the said salary, fees or emoluments, there shall be deducted from the amount thereof the sum so fixed by the Treasury:
Provided that if any person would, but for the provisions of this rule, be entitled to deduct a larger amount than the sum so fixed, that sum may be deducted instead of the sum so fixed.—[Major Bruce.]

Brought up, and read the First time.

The Deputy-Chairman: Major Bruce.

Lieut.-Commander Braithwaite: May I ask whether it is your intention, Mr. Beaumont, to call the new Clause standing in the name of my hon. Friend the, Member for Bath (Mr. Pitman) (Deduction for season ticket in certain cases), which appears to deal with a similar point? If that new Clause is not to be called, will it be in Order to make reference to it on this new Clause?

The Deputy-Chairman: I do not propose to call the new Clause standing in the name of the hon. Member for Bath

(Mr. Pitman), but it will be in Order to refer to it.

7.15 p.m.

Major Bruce: I beg to move, "That the Clause be read a Second time."
The purpose of this Clause is to remedy an injustice which affects a wide section of the population. It affects all that section of the population who receive wages or salary, and it would appear to necessitate certain amendments to Rules 9 and 10 of Schedule E of the Income Tax Act, 1918. Perhaps the Committee will forgive me if I read Rule 9 of Schedule E of the First Schedule, which says:
If the holder of an office or employment of profit is necessarily obliged to incur and defray out of the emoluments thereof the expenses of travelling in the performance of the duties of the office or employment, or of keeping and maintaining a horse to enable him to perform the same, or otherwise to expend money wholly, exclusively, and necessarily in the performance of the said duties, there may be deducted from the emoluments to be assessed the expenses so necessarily incurred and defrayed
The new Clause endeavours to modernise this rule by inserting something after the word "horse." It will be observed that in the new Clause the words,
or other means of conveyance
have been inserted in order to bring the rule up to date. In point of fact, the Inland Revenue have administered this rule in a very modern fashion over the last few years, and it has been handled intelligently notwithstanding the fact that the wording may be obsolete The second purpose of the new Clause is to widen the scope of the amount allowable as expenses. This is a rather important point, because there are millions of people employed in the country who are receiving wages and salaries. The rates of tax are very onerous, and a very large amount is incurred by way of expenses in connection with the professions or occupations of these people. The essentials for the deduction of expenses for tax purposes under Rule 9 at present are, first of all, that the person who is assessed in respect of his office or employment must be "obliged" to incur the expenditure; and secondly, it must be
wholly, exclusively and necessarily
incurred "in the performance" of the office or employment concerned. This has


worked out in the past in a manner which has proved to be somewhat anti-social. I would like to quote a case to illustrate my point. In the case of Simpson v. Tate, a King's Bench Division case in 1925, which was reported at page 214 of the King's Bench Division Reports, a medical officer of health for a county joined certain medical and scientific societies in order that, by means of their meetings and published transactions, he might be aware of all recent advances in sanitary science, and keep himself up to date on all questions affecting public health. That is, surely, an activity which, broadly speaking, Members on both sides of the Committee would, in general, concede to be of benefit not only to the man's own personal position, if that were brought into account, but to the benefit of the particular employment which he had selected to follow as his vocation. But in that case it was held, on the interpretation of the rule, which I am seeking to amend, that the subscriptions were not money which he was obliged so to expend, and they could not be deducted
I would like to quote a more recent case, and perhaps my hon, and learned Friend the Member for Kettering (Mr. Mitchison), who I hope will have the opportunity of catching your eye, Mr. Beaumont, will also have one or two cases which bear upon the subject. There is the case of a Mr. Blackwell—an inspector of taxes—v. Mr. Mills, in which it was stated to be a condition of the employee's employment that he should attend classes at the Chelsea Polytechnic. His counsel contended that since the subject matter of these classes was not unconnected with the duties which the respondent had to perform, he should be regarded as performing the duties of his office when attending those classes. But, in his Lordship's view, that was not so. The duties of his employment were those of a student assistant in the laboratories of the General Electric Company, Ltd., and it was impossible to say that when he was listening to a lecturer at the Chelsea Polytechnic he was performing those duties. These two cases give, broadly speaking, the way in which these rules of Schedule E have been interpreted in the past. I submit to the Chancellor of the Exchequer and to the Committee that the maintenance of those rules in their existing form is not conducive to the maximum initiative and

enterprise on behalf of that very large number of people in the country who are engaged in employment, as distinct from carrying on businesses of their own.
The Committee may be interested to Know that when one passes to considerations affecting those covered by the phrase, "trade, profession, employment or vocation," and assessed under Schedule D, wholly different rules apply. Many of us may wonder why there has been this differentiation. If the Committee will forgive me, I should like to pass to the rules governing Cases 1 and 2 of Schedule D, wherein it is laid down that the expenses or disbursements which are allowable to be charged against profits made under Schedule D are those wholly and exclusively laid out or expended "for the purposes of"—I would emphasise the words "for the purposes of"—"trade, profession, employment or vocation." Those are very different from the rules that are laid down in Schedule E. There is no operative word "obliged" in the rule for Schedule D. There is no restrictive "in the performance of" governing the rule. It does appear that those who have the good fortune—if anybody who attracts taxation can be said to be in good fortune—to be assessed under Schedule D are able to charge expenses against profits or against revenue on a much larger scale than those in the very narrowly restricted class assessable under Schedule E. At the present time it is quite possible for a director or other official of a large limited company to take a friend out to lunch—and a very expensive lunch at that—and to charge his expenses, or have his expenses charged, for Income Tax purposes against the profits of the company. There is no such facility—indeed, this new Clause does not seek such wide facility—for those who are assessed under Schedule E. But the new Clause does ask that the position be made more comparable between the two Schedules.
The Chancellor of the Exchequer may reply that this is opening the door too wide. Our immediate answer is that the wording used in the terms of the new Clause has been taken exactly from Schedule D, and if adjusting the rules of Schedule E to the rules of Schedule D be opening the door too wide, it would appear that the door has been open too wide, at any rate, in one direction, for


a very long time now. I think that, at the present time, when the Government are calling for maximum initiative from all those in industry, whether employers or employees, every conceivable reasonable encouragement should be given to those people who desire to better their position for the purposes of the employment or offices in which they are employed. In that sense I ask the Chancellor of the Exchequer to accept this new Clause.

Viscount Hinchingbrooke: Could the hon. and gallant Gentleman explain the significance of Subsection (10) of his new Clause, which seems to me exactly to repeat the words in Schedule E?

Major Bruce: Subsection (10) is designed to bring the position of those in the employment of the Government into line with that of those employed in private enterprise businesses as under Subsection (9), and it broadly accomplishes for those employed in the Treasury or Government employ what Subsection (9), as we now propose, does for those employed in private enterprise.

Mr. Mitchison: I support the new Clause. I am principally concerned with Subsection (9) of the new Clause. My only reason for supporting it is that I think the distinction between Schedule D and Schedule E assessments often becomes very narrow, and that those who are assessed under Schedule E are entitled to treatment at least as favourable as that of those on the other side of the line assessed under Schedule D. If I may give-two instances of how narrow the distinction between the two Schedules can be, I should like to refer, first of all, to the humble calling of share fishermen. It is difficult to say whether share fishermen are assessable under Schedule E or Schedule D, and the matter has caused a good deal of doubt. There has been, I believe, one case about it, and I think it is open to a certain amount of question whether that case was rightly decided. The Committee will remember that, when this question arose in connection with national insurance, steps were taken to treat that particular class of person as employed and, therefore, to place them under Schedule E for tax purposes.
The other instance is the obvious instance of the doctor, who, 'so long as he practises on his own, is and has always been assessed under Schedule D, but who, when practising, as in the case to which my hon. and gallant Friend the Member for North Portsmouth (Major Bruce) referred, in employment, immediately becomes assessable under Schedule E. There is a remarkable difference between what he is entitled to set off by way of expenses in the one case and in the other. I suggest to the Committee that the importance of this new Clause is in regard to the particular case of expenses of travelling for the purposes of the duties of the employment, and as regards everything else that has made necessary his disbursements or expenses incurred for the purposes of the duties.
7.30 p.m.
I believe the Committee will view sympathetically the very hard case of the research student in the G.E.C. laboratory, to which my hon. and gallant Friend referred, and which it must have wrung the kind heart of the Solicitor-General to have conducted so successfully and so unfortunately in the court. That case turned entirely on the fact that that young man was improving himself in his profession; and though he was doing so with the consent of his employers, who were paying half of a good many of his expenses, yet he had to be treated as not incurring those expenses for the purposes of his duties as a student research worker; and, accordingly, his expenses were disallowed. What he was trying to do was to improve himself in his profession, and I feel certain that those Members of the, Government who have just been so willing to withdraw a tax on education in one form, will realise that in that particular case, at any rate, the strictness of the rules under Schedule E acted as a tax on education. So, in the case of a rather older man, it acted similarly with regard to the medical officer who was mentioned. There is a similar case in regard to a man who was working as an engineer for a public authority, and was not allowed to count his expenses arising from his belonging to the Institute of Civil Engineers. The substance of the difficulty is that there are cases in which, to quote what was said with regard to Schedule E:
A sum of money expended, not of necessity and with a view to a direct and immediate benefit to the trade or profession, but voluntarily and on the grounds of commercial or


professional expediency, and in order indirectly to facilitate the carrying on of the business "—
or profession, of course—
may yet be expended wholly and exclusively for the purposes of the trade or profession.
I suggest that the retention of the words "wholly and exclusively" is quite sufficient protection in practice; and that it will not be possible to use the extension, undoubtedly given by this Subsection, if it is accepted, for the purpose of any sort of evasion. Indeed, the class of person whom it is intended to protect and assist by this new Clause is not very apt to be an evader of taxes of this sort. This new Clause is intended to protect the employed person, whatever his status may be, and to put him on the same footing as regards taxation, and as regards the expenses he has to incur in respect of his job, as someone who is a professional man working on his own account.
The Committee have seen, I suggest, the narrowness of the difference, and I hope the Government may be able to go some way to meet us in this respect. I fully appreciate that there are considerable difficulties in drafting—and they are well known—in connection with the Schedule D rules. It may very well be that it would be wise to consider the exact wording of this new Clause. But I hope we may have some assurance that in principle employed persons, under Schedule E, will be treated at least as well in regard to expenses, wholly or exclusively incurred in connection with their employment, as professional persons are now treated under Schedule D.

Colonel Crosthwaite-Eyre: If I may use a phrase coined earlier this evening, I feel that the hon. and gallant Member for North Portsmouth (Major Bruce) has drawn another "cherry," and I hope the Chancellor of the Exchequer will view this new Clause in that manner. It seems to me that the real distinction between those who come under Schedule D and those who come under Schedule E has, since 1918, grown more and more artificial. The hon. and learned Member for Kettering (Mr. Mitchison) has given various examples in which it is practically impossible for at least an ordinary layman to adjudicate on whether a man is to be on one side of the fence or the other. If the Financial Secretary is replying to this Debate, I should be very interested to hear why a

share fisherman, for example, is put under Schedule E. On reading these two Schedules, it would seem to me that he is much more qualified to come under Schedule D.
Apart from these minor distinctions, surely, in the present state of industry, every hon. Member of this Committee, whether he sits on this side of the House or on that, is concerned solely with trying to get the greatest production, the greatest incentive, and the greatest opportunity for people in all spheres of industry. And to maintain this distinction is to deny this. I suggest that at this present time there can be no excuse for maintaining, on the one side, the distinction under Schedule D that the words "wholly or exclusively for the purposes of" should allow one set of people to, get away with, I might almost say, any expenses they like—subject, of course, to the auditors, and to the other restrictions of the Companies Acts—and, on the other side, under Schedule E a great number of people being debarred from in any way improving their position, unless they are willing and able to pay tax on whatever sums are expended by them to that end.
There are three main categories of expenses which, I think the Committee. will agree, come under this description: entertainment, travelling and education: I cannot agree with what the hon. and gallant Member for North Portsmouth said about the mechanism for entertaining ad lib, and at the most expensive restaurants. It is, I may say, my only point of divergence. I am a director; and I acknowledge that willingly. But were I to follow the procedure the hon. and gallant Member suggested, my auditors would very soon have something to say to me. And, I think, his suggestion in this regard is going perhaps a bit too far in drawing the distinction. But why, on the one hand, should a director be able to get away with any entertainment which he certifies, and which the auditors are prepared to accept? On the other side, under Schedule E, suppose one has a salesman who is suddenly confronted with the position—this is just one instance drawn at random—where he has to entertain an overseas buyer. He has an opportunity, if he likes. to take the risk of entertaining that buyer at considerable expense to himself; consequent upon his success with the buyer he may or may


not get the authority of his firm to charge that expense back to the firm. If he does get that authority, then the expense comes under Schedule D. If he does not get that authority, then it has to come out of his own pocket under Schedule E.
That is just one example, and I think the Financial Secretary would agree that at the present moment anything which invalidates our export drive, by making it difficult for people to take a chance on opportunities like that, is wrong; and that those who are in that position are just as important to industry as directors, and should be treated in the same way. It is the same with travelling. At the present time there are under Schedule D persons who can travel anywhere on the authority of their firm; there are people who can do anything which, in their judgment, may, at the time the decision is taken, be conducive to the welfare of the firm; the expenses in regard to which may be put down, in their opinion, honestly as "wholly and necessary." On the other hand, there are people who can do the same things only if they are necessarily obliged to, and they may or may not get the expenses they have incurred in a genuine effort to help the welfare of the firm.
I think that the worst examples of divergence come under education. The hon. and gallant Member for North Portsmouth has given several. If one looks at industry at the present time, whereas I think it fair to say that most firms are willing to make every possible contribution towards helping employees, particularly apprentices and young people, in their firms to get experience and education which will assist them, at the same time there are many firms, particularly today, who cannot do it. I do think it is all wrong that a young man is dependent for his progress on whether his firm can, in fact, afford to pay for him or not. That is what this distinction comes to. Without trying to enter into politics, I would point out that we had a very serious crisis earlier this year; a lot of industries have been stopped; and we are short of materials. Many firms may sincerely wish to help their apprentices by giving them opportunities, and by enabling them to learn at night schools, and by doing one thing or another to enable those apprentices, at some future date, to

take a higher place in the industry than that at which they started. But those firms may be stopped; they may simply not have the financial resources available. As the present differentiation stands, the only way in which their apprentices can obtain that further education is not only by paying for it themselves, but by paying it out of taxed income. What the hon. and gallant Member for North Portsmouth was suggesting is that the whole of this artificial distinction should be abolished, and that Schedule E should be brought into line.
Before we pass from this subject, we should like to know a lot more about what happens under Clause 10 of the existing regulations. We have laid down there in the case of civil servants that the Treasury controls sums which may be considered deductable for taxation purposes by any civil servant, or in fact, anyone occupying office under the Crown. We should like to know what relaxations are afforded, and how far it is possible for someone in the junior grades to be able to learn languages, or to go to night school at his own expense, but certainly I hope not at the expense of his taxed income. The Committee would benefit very much if they knew how the Treasury apply these rules. This is a subject worthy of consideration in all parts of the Committee. At this time we depend upon enterprise, upon productivity, and above all upon giving our youth every opportunity to qualify for the difficult times ahead. By accepting this Clause we shall remove an anomaly, and we shall be doing our best to ensure that in the coming difficult years our youth is best equipped to serve the State.

Mr. Mitchison: May I make a personal explanation? It escaped me to mention that as a director and Member of this House, I am an employer of a Schedule E employee.

7.45 p.m.

Lieut.-Commander Braithwaite: Your predecessor, Major Milner, was good enough to indicate that it would be in Order to make some reference to the new Clause, standing in the name of my hon. Friend the Member for Bath (Mr. Pitman), dealing with the narrower point of season tickets and setting off the cost for the purposes of Income Tax. The hon. and gallant Member for North Portsmouth (Major Bruce) described his new Clause


as modernising the situation, but on whether it will be effective or not I shall express no opinion, because we must rely upon the view put forward by the Solicitor-General, who alone can say whether the wording will have the results we desire. There is no doubt at all about the need 'for this machinery to be brought up to date. There are particularly difficult problems of travel at the moment, due to the difficulty of people obtaining housing accommodation, which is anywhere near their places of employment. Only the other day, I read in the paper of a case, which I cannot think is common, of two gentlemen, one living in Westbury-on-Trym and the other living in Burnham-on-Sea. These places are about 28 miles apart, and the gentleman in Westbury is employed in Burnham, and the gentleman in Burnham is employed at Westbury. An attempt was made by these gentleman to make an exchange of their council houses. but one of the local authorities refused permission because, I think, they thought it would upset their points system. And so these two gentlemen solemnly travel 28 miles in opposite directions, each to work in the locality where his opposite number lives. That is an example of the sort of difficulty which arises at the moment, and that is why I particularly welcome the fact that this new Clause should be moved by the Parliamentary Private Secretary to the Minister of Health. We see the hon. and gallant Member in our midst a good deal—no doubt there is not much going on in the Ministry—and I am glad that he is with us to remedy one of the results of the conduct of his chief.
Vast distances are being travelled by people to their places of employment. The season ticket problem is an old problem, and particularly affects people working in offices and factories in London who live in the suburbs. It used to be said, and it may be said now, that distance is a factor in this matter. We may be asked: What about the businessman living in Brighton, travelling first class to London every day? Should he be permitted to set off his season ticket as expenses against income tax? I have always considered that this could be dealt with if a limit were put on price or distance. It is certainly a factor which should now be taken into consideration. I cannot believe that the Government are going to refuse this concession, if only for the reason that we have

done it for ourselves in the House. Only last year, there was introduced a system by which hon. Members who live in the suburbs have season tickets provided for them, which is an inverted method of setting off the amount against the expenses of employment. I am quite sure that the Government will not refuse the general public something which they have done for the hard-working community in the House. It seems that a concession is inevitable, as it has now been conceded—[An HON. MEMBER: "Sarcasm"] I can assure the hon. Member that it is perfectly serious. I think it is a had thing that hon. Members should be put in this and in other matters on a different footing from the general public. That is not what we are here for. We have done this for ourselves, and I know that it is the proper thing to do if our duties are to be efficiently carried through. It was done as a result of a Select Committee, composed of all parties, and I am merely giving it as an illustration of why this Amendment ought to be accepted.
The Clause we are discussing deals with an overdue reform. My hon. and gallant Friend the Member for New Forest and Christchurch (Colonel Crosthwaite-Eyre) gave three headings under which he thought it desirable that the concession should be made, and I endorse everything he has said. The season ticket Clause is another overdue concession, and I hope, in view of the unanimity which has been shown—and so far there has been no discordant voice from either side—that the Financial Secretary or the Solicitor-General will tell us that the Government are so convinced by the overwhelming argument that they are going to accept the Clause.

Mr. Pitman: On a point of Order. May I speak on this Clause without prejudicing my opportunity to speak on the new Clause, standing in my name, because the two issues are so completely different that it interferes—

The Chairman: I am afraid that the hon. Member's Clause has not been selected. If he can conveniently make any relevant remarks now, he is a t liberty to do so.

Mr. Pitman: The two Clauses are very dissimilar, and the trend of thought is spoilt completely in dealing with the two subjects. I should like to speak on the main Clause, about which I have strong


views, but if that is your Ruling, Major Milner, I shall have to confine myself to what is a separate issue. There are very special conditions at the present moment, applying particularly to girls who are being urged by the Government to do work in neighbouring big towns. This particular case comes from one of the constituents of my hon. Friend for Thirsk and Malton (Mr. Turton), who gave me figures of journeys made daily by girls from the villages into York. By the time they have paid for their season tickets, there is very little left for them to take home. The Government are in a dilemma. Either they have to say with one voice, to rural workers in the low income groups, "You ought to go and help the country to produce," or, with the other voice, "The expenses of your getting to work shall not come within your P.A.Y.E. calculations."
What I did in the new Clause I had hoped to move was to put two limits to it. I put a limit of income at one-third of the standard rateô3s. in the pound. So, I am not asking for this concession for anybody except the people in the lowest income groups, that is, only for those people who are paying at 3s. in the pound. These people are obviously not living away from their place of work by choice. They are living away because that is the place where they can live cheapest, and because of the present housing shortage. The second limitation is that I said that this should apply only in the case of a season ticket costing £10 per annum. I would claim to be a purist in this field, and I am not pressing the Government to extend this to all season-ticket holders, because it seems to me that it is the job of the man who is employed to get himself to work. If he likes to live a long way from his work, let him pay for it; but that is not the condition for these people who are kept in their own homes by their fathers and mothers. Those homes are the best and cheapest places for them to live in and from which to carry out their daily work. So, I plead the case strongly for them.
I would not like the Financial Secretary to say that I am doing the thing I am complaining about in regard to the complexity of the Income Tax Acts. He would be justified in throwing that one at me, but I feel that the whole question of the Income Tax Acts can be cleared up very

considerably. This will mean yet another bit of calculation to be done, but there is such a thing as breaking the back Of the camel that will not work, so that you have to get a camel that will, and do it properly. This is an opportunity for the Government to give us this concession, at any rate temporarily, while they are working out 'a set of Income Tax laws which apply to the weekly wage earner, and are not an anachronism.

Mr. Glenvil Hall: The object of this new Clause can be summed up in this sentence: it is to make the test for expenses allowance under Schedule E the same as for expenses allowance under Schedule D. The general position is that, under Schedule D, expenses to be allowable, must be wholly and exclusively laid out or expended for the purposes of the trade or profession The operative words for those who come under Schedule D are "for the purposes." Under Schedule E, the expenses must be wholly, exclusively, and necessarily expended in the performance of the duties of the office or employment, and the operative words are "necessarily" and "in the performance of." The courts have held that the words of Schedule E cover only expenses incurred of necessity by every holder of a particular office or employment; that is, the expenses they will allow must be the type of expenses they will allow to every holder of an office or employment.
But that does not follow when we come to Schedule D. There, whether the expense is allowed depends upon whether the person who incurred it can substantiate it, first to his auditors, and then to the Inland Revenue. That is the great difference between the two. It is my case that there is no real analogy between those who are assessed under Schedule D and those who are assessed under Schedule E. It is true, as my hon. and learned Friend the Member for Kettering (Mr. Mitchison) pointed out, that there are border-line cases—and the hon. and gallant Member for New Forest and Christchurch (Colonel Crosthwaite-Eyre) mentioned one type of fisherman —but that does not affect the principle. It is the principle which the Inland Revenue have to go on, and it is broad principles on which we have to legislate. It is almost exclusively true that the Schedule E man is paid a fixed salary


for a particular job. It can be ascertained with a fair degree of exactitude whether certain expenditure connected with that fixed job is or is not necessarily incurred in the performance of the duties of his office or profession. But when we come to the Schedule D man he is not working for an employer; he is working for himself. He does not know what his profit or his income for that year will be. He may guess, but he does not know. It is necessary for him voluntarily to expend certain sums on the earning of the profits on which he is afterwards assessed.
8.0 p.m.
I think the Committee will agree that the expenses allowed in these two categories are different. They can be distinguished. If we begin now, at this late date, to allow to the Schedule E Income Tax payer, who has a fixed emolument, and who is working for someone else, the same expenses as we allow to a man under Schedule D, we shall open the gate wide indeed, and land ourselves in considerable difficulty. Therefore, we are unable to accept this new Clause. Cases which have gone into court have been quoted to indicate that there is hardship on the young fellow or young girl who goes to evening classes, and spends money on books and attending lectures, which cannot be charged as expenses. Undoubtedly, that is so, but we cannot, because there are cases of hardship of that sort, open wide the gate in the way this new Clause would do, because that would mean a number of expenses would have to be allowed which were legitimate in themselves, such as have been quoted. The hon. and gallant Member for North Portsmouth (Major Bruce) quoted the case of Simpson v. Tate. I have here part of the judgment in that case, and I cannot put it better than in the words of the judge. He said:
I think that all subscriptions"—
he was talking about subscriptions to learned societies and to periodicals, but the underlying principle is the same—
to professional societies and all taking in of professional literature and all that sort of expenses which enables a man to keep himself fit for what he is doing are things which can none of them be allowed. If they were allowed, every professional man would say, 'I have to belong to this and I have to belong to that society; I have to take in this publication and I have to take in that publication, and to do

all sorts of things, and there would be no end of it. I think the principle is quite clear. Nothing of that sort can be allowed.

Mr. Mitchison: Is it not a fact that subscriptions and expenses of that sort are allowed under Schedule D? The question is, are they to be allowed under Schedule E as well? Before the right hon. Gentleman commits himself any further, may I express the hope, on behalf of the mover of the new Clause and myself, that if nothing can be done as regards family and other matters, with which we are very little concerned now, can he not allow some form which would meet the educational side?

The Chairman: That is a matter which I think will arise on a new Clause which I propose to call later.

Mr. Glenvil Hall: I agree, and, therefore, I will not answer my hon. and learned Friend, except to say that I realise that there is a distinction, and any hon. Member who is also a member of the Bar will know that if he buys a legal book tax deduction is not then allowed, but if he renews it, it is allowed. There are all sorts of anomalies of that kind. We shall be dealing with that later. It is true that this exception is allowed, but it is not allowed to doctors and other professional men who happen to be working under the Minister of Health for fixed salaries. We can elaborate that when we come to the new Clause to which reference has been made.
The hon. and gallant Member for New Forest and Christchurch asked me to make some observations about Rule 10. Rule 10 embodies for public servants and those who are paid from public funds the same provisions as are contained in Rule 9 of Schedule E. The hon. and gallant Member for North Portsmouth would put the expenses allowances under Rule I() on all fours with those which now come under Rule 9. Of course, the two hang together, but, as I have indicated my right hon. Friend cannot accept the new Clause relating to Rule 9 and he cannot accept it in regard to Rule 10.
Rule 10 makes special provision under which the Treasury can fix a flat rate deduction for classes of persons paid hum public funds on the basis of an annual average scale of expenses which may reasonably be said to fall on them in the course of their duties. I was asked if I


would indicate the class of person who was given the advantage of this rule. Members of Parliament are. As every hon. and right hon. Member knows, we. are allowed, without question, £100 a year as a set off against what we spend on secretarial assistance, postages, stationery, telephones and certain other expenses which fall on all of us. We are given this £100 under this particular rule. No civil servant, so far as my information goes, is allowed any allowance or expense under this rule. But, for instance, Officers of the Services come under it, and get allowances for uniform and other things. I can assure the Committee that the number of these allowances is not large and that the people concerned do not include any civil servants.

Mr. Pitman: Is the right hon. 6entleman correct on that point? I think civil servants can be included under Rule Io: for instance, land officers travelling about and using their cars to visit properties.

Mr. Glenvil Hall: There are not so many of them travelling about now in their own cars. During the war many of the cars became so old that the State had to provide them with cars until the old system could be reintroduced. In cases of that kind they are repaid what they have expended. That is a definite type of allowance which is a fixed allowance given year by year, based on what is considered to be a reasonable outlay, and prevents them from doing what many people have now to do under Rule 9, which is to make to the Inspector of Taxes a return accompanied by some sort of evidence as to what they have actually spent in the course of a year by way of expenses in making their profit.

Mr. Pitman: Possibly there is a misunderstanding, or I have misheard the Financial Secretary. I understood him to say that no civil servant gets any allowance under Rule 10.

Mr. Glenvil Hall: That is my information. When I was asked a question by the hon. and gallant Member for New Forest and Christchurch, I think he particularly mentioned civil servants in the course of his remarks.

Colonel Crosthwaite-Eyre: Can the right hon. Gentleman say what sums are allowed for educational purposes?

Mr. Glenvil Hall: If the hon. and gallant Member is referring to civil servants, the answer is, "None." I have checked that during the discussion. Whether they should be made an allowance under this or some other rule is, of course, a question for debate, perhaps at another time.
I understand that I am expected to make some reference to the subject of the Clause on the Order Paper in the name of the hon. Member for Bath (Mr. Pitman). I do not quite know the basis upon which he has elaborated his Clause. He talks here of making an allowance towards the cost of any monthly or yearly season ticket. What the quarterly season-ticket holder has done to annoy him, I do not know, but apparently he has no place in the Clause for anyone but a monthly or yearly season-ticket holder; nor does he mention the individual who has to travel regularly by tram or 'bus. Therefore the wording of this Clause in any case could not be accepted. But neither could the principle underlying it. It has been a well-established rule for very many years that the cost of travelling cannot be taken as an expense for Income Tax purposes. It is true that during the war, because of the difficulties, a special change was made which permitted a person who was involved in extra travelling costs because his residence or place of work had changed through circumstances connected directly or indirectly with the war was allowed to apply for, and get, a £10 special allowance, That, of course, cannot continue indefinitely, and it certaily cannot be enlarged to include anyone. because as has been laid down for many years in more than one case, it is a fact that persons live where they will. It is for them to decide, and the expense of getting to work cannot be allowed as an Income Tax expense.
It could be argued that that means hardship for some people. One individual may live at Southend and have to come up to London for a job, whereas another, who is fortunate enough to live in Kensington and to have a very small 'bus or Underground fare to pay, is therefore not spending as much as the first one. These things, however, even themselves out, and it is very likely that the person who lives at Southend may be paying a cheaper rent than the person who lives in Kensington. Nevertheless, it has been through the years a fixed rule thoroughly


embodied in our Income Tax law that people must live where they will and that we cannot allow travelling expenses as expenses for Income Tax purposes.

Lieut.-Commander Braithwaite: Would not the right hon. Gentleman agree that it is still the case, during the aftermath of war, that many people are not living where they will, or anything like it? A man whose house has been bombed and who may have had to move, through no volition of his own, to other accommodation 20 miles away cannot be described as living where he will: he is living where he has got to.

Mr. Glenvil Hall: I did not say that everybody was now living where he would. That was not my contention. I was simply saying that normally, so far as Income Tax law is concerned, no account whatever is taken of where people live, and no allowance is made for fares because one person lives a long way from his work and another lives quite near. The only inroad into that rule which has been made is the one that was made during the war and which allowed a person up to £10 because of the special circumstances of the war. I am only saying that that obviously cannot be continued, unless of course the House wills that it should be continued. It is our view that we should not enlarge that breach, because if we did it would lead to a very large number of anomalies. For one thing, if the new Clause moved by the hon. Gentleman the Member for Bath (Mr. Pitman) were accepted, apart from its being partial in its incidence, it would he very unfair on somebody who happened to spend just over £10. If he or she did they would not have the benefit of this Clause. It would also make great inroads into the coding of P.A.Y.E. I am informed it would be impossible to work P.A.Y.E. for a large section of the community, because no one would know in advance what they were going to spend and whether it would be under or over fro or whether they would come within this 3s. limit. Those and other considerations make it impossible to accept the Clause and I would ask the Committee to reject it.

8.15 p.m.

Major Bruce: I should like to say how much my hon. Friends and I are disappointed in the right hon. Gentleman

being unable to accept either the wording of the Clause or the spirit behind it. I should like to deal very briefly with the last point. The right hon. Gentleman implied that if allowances for expenses were allowed on a large scale to people assessed under Schedule E it would make P.A.Y.E. unworkable. If I may say so, that is entirely beside the point. Every person who is assessed under Schedule E, even though they may have their tax deducted week by week, have the right —and it is a right which should be more widely known—at the end of the year of insisting that they shall have their whole tax position reviewed and any expenses to which they are entitled adjusted. I do not think that the point made by the right hon. Gentleman is one of substance.
The right hon. Gentleman said that the case put forward by myself, the hon. and learned Member for Kettering (Mr. Mitchison) and other hon. Members proposed to bring these persons on all fours with the class of person under Schedule D. That was not the purpose at all. It was the purpose to bring the position of the taxpayer who is assessed under Schedule E, that is the wage and salary earner, into rather more close conformity with the person engaged in trade, commerce and business who is assessed under Schedule D. Had the hon. and gallant Member for Holderness (Lieut.-Commander Braithwaite) read the Clause put forward by my hon. Friend and myself more closely he would find that travelling expenses are not affected by it, and the position in regard to them remains exactly the same as under the original Schedule E Rule.
The right hon. Gentleman the Financial Secretary based his case on the opinion that there was some fundamental difference between those classes of people who were assessed under Schedule E, the salary and wage earner, and the persons assessed under Schedule D, who conducts his own business or company or whatever it might be. He implied that the company or the trader or the professional man assessed under Schedule D should as a right remain indefinitely in a much superior position than those employed on a salary or wage basis. By some kind of divine right this is to be allowed to be continued. Though the right hon. Gentleman said that if he accepted this Clause it would open the door wide, nevertheless there was no indication in his speech of


closing the door in regard to Schedule D which would thereby be open to abuse.
It is not the purpose of those who put forward this new Clause to open the door wider in regard to entertainment expenses and things of that kind which we know are commonly allowed at the present time under Schedule D. The purpose was that those people who had the good fortune or otherwise to be in employment, if they desired to improve their own position, would be entitled to deduct from their Income Tax assessment as much money as they had expended for this particular purpose. It may be that the wording adopted in this new Clause is a little wide, and that to that extent the right hon. Gentleman is justified if only on the grounds concerning too much entertainment expenses. But that is not the purpose of the Clause at all. I and my hon. Friends on this side may take the opportunity on Report stage of moving a further Amendment which may narrow the proposal down to the desired limits and which, we trust, will present the right hon. Gentleman with such an unanswerable case upon the narrow field that he will be unable to resist. In those circumstances, and with this in mind, I beg to ask leave to withdraw the new Clause.

Mr. Baldwin: I should like to say a few words in support of my hon. Friend the Member for Bath (Mr. Pitman) in connection with wage-earners. There are small pockets of unemployment throughout the country and it is desirable that the men in those districts should be able to search for a job. It may be that work is available some distance away by bus or train, and it seems to me that a certain allowance would be of advantage in encouraging people who now queue at the employment exchange to go a short distance to look for work. I cannot see that there need be any abuse; the railway or bus ticket could be handed in by the man concerned after he had completed the journey. I would ask the Financial Secretary to give this matter a little more consideration.

Question put, and negatived.

Mr. Mitchison: On a point of Order, Major Milner, I thought that the hon. Member who moved the Question for the

Second Reading of this new Clause had asked leave to withdraw it?

The Chairman: The hon. Gentleman the Member for Leominster (Mr. Baldwin), who spoke subsequently, has, by implication, objected to the Clause being withdrawn.

Mr. Stanley: On that point of Order, Major Milner. You may not be aware that during your absence from the Chair the Deputy-Chairman gave an entirely different Ruling. He ruled that, provided the question of leave to withdraw had not been put from the Chair, the fact that one or two hon. Members intervened to speak did not prevent him subsequently putting that Question. It is not a point of any great importance on this occasion, but since we have had two entirely contradictory Rulings from the Chair within a space of one and a half hours, it might be a good thing to have the matter cleared up.

The Chairman: I am obliged to the right hon. Gentleman, but he will appreciate that circumstances alter cases. I do not know the precise circumstances in which the earlier Ruling was given, but I imagine that they differ from these. However, I will consult with the Deputy-Chairman as to the difference, if there be one.

Mr. Stanley: Although I entirely agree with you, Major Milner, that circumstances alter cases, do they always alter Rulings from the Chair?

The Chairman: Certainly, if the circumstances differ.

The following new Clause stood upon the Order Paper:

(Motor vehicle taxation.)
On and from the date as from which the rate of the Customs Duty payable under Section two of the Finance Act, 1928, on hydrocarbon oils shall be increased from nine-pence per gallon to one shilling per gallon, Section thirteen of the Finance Act, 1920 (which imposes excise duties on mechanically propelled vehicles) shall have effect as if the paragraphs and sub-paragraphs set out in Parts I, II, III, IV and V of the Schedule (Amended rates of duty in the case of certain mechanically propelled vehicles) to this Act were respectively substituted for paragraphs 1, 3, sub-paragraphs (d) and (e) of paragraph 4, and paragraphs 5 and 6 of the Second Schedule to the said Act of 1920 except in, to tai its the last mentioned paragraphs and sub-paragraphs relate to vehicles propelled by electricity, gas


or steam, provided that nothing in this Section or in the Schedule (Amended rates of duty in the case of certain mechanically propelled vehicles) to this Act shall be deemed to alter or revoke the provisions of any enactment granting exemption from liability for additional Excise Duty in respect of a vehicle. It used for drawing a trailer.

The Chairman: The new Clause standing in the name of the right hon. Gentleman the Member for Bristol, West (Mr. Stanley) is out of Order.

Captain Crookshank: On a point of Order, Major Milner, may we know for future guidance why it is out of Order?

The Chairman: The first reason is that it may impose a charge upon the Exchequer. The second reason is that the date is a hypothetical one. The right hon. and gallant Gentleman will appreciate that any question of duty must come within the current Income Tax year, and that is not necessarily the case under the term of the new Clause in question.

8.30 p.m.

Captain Crookshank: With all respect, Major Milner, could you tell me how it is likely to impose a charge? As we drafted it, we were careful to try to make certain that it will not impose any extra charge. I fail to see any words which would justify that point. On the second reason, may I submit that the case, being hypothetical, is not necessarily out of order, because there have been previous occasions, on which, for example, the words "appointed day" were referred to? If you will look at the Finance Act, 1941, you will find a reference there to:
such date as Parliament may thereafter determine
—which is a very hypothetical date, and is for allowances to come into effect. It would, therefore, seem that because no set date is inserted the new Clause is not necessarily out of Order.

The Chairman: I can only say to the right hon. Gentleman that I have taken the best advice available and on the information given to me the new Clause might impose a charge. That being the case, I have no alternative but to rule it out of Order.

Captain Crookshank: I am sorry to persist. It seems so very mysterious. We have done our best to find out if it could conceivably do that, and I was only ask-

ing, for our guidance, where this likelihood emerged. We have entirely failed to find it. If, however, it is anything to do with the first two and a half lines down to the second "per gallon." would it be in Order to move the new Clause without those words in the form of a manuscript Amendment beginning at "section thirteen"? For the sake of the argument and the point we want to put before the House, it would be equally valid if those words were omitted.

The Chairman: I have every desire to assist the right hon. and gallant Gentleman, but these matters are extremely complicated and I am afraid that it would not now be possible to give consideration to a manuscript Amendment in that form and I doubt if it would dispose of the whole question. I am sorry.

Mr. Stanley: I know that this is a very difficult matter but it raises a point of great importance and one on which, as we have been assured by all the Sunday papers, the morning papers and now the evening papers, the Chancellor of the Exchequer is extremely anxious to make a statement. Will there be any possibility on the Committee stage of this point being raised and, if so, would it be possible for you, Major Milner, to indicate where?

The Chairman: There is another new Clause on the Order Paper in the name of the hon. Member for Widnes (Mr. Shawcross) dealing with the question of motor taxation which it is my present intention to select (Amendment of Finance (No. 2) Act, 1945, and Finance Act, 1920). It may be—I do not know—that the Chancellor of the Exchequer may desire to make a statement on that, but I have no information on the point.

Mr. Stanley: That is what I am worried about. Looking at the new Clause in the name of the hon. Member for Widnes I read:
For the purposes of this section the appointed day shall be such day as the Treasury may by order appoint.
As you gave your Ruling, Major Milner, it passed through my mind that there is nothing in that Clause to ensure that that day should be appointed during the present financial year. Therefore, I came to the reluctant conclusion that on your Ruling on the other Clause you were also going to rule the Clause in the name of


the hon. Member for Widnes out of Order and that, therefore, there would be no opportunity whatsoever for this important matter to be discussed. If that is not the case it would be very much for our future edification if it could be explained why the words:
for the purposes of this section the appointed day shall be such day as the Treasury may by Order appoint.
are more specific and less hypothetical than the words in our Clause.

The Chairman: I had formed the opinion that the appointed day is capable of being made certain if the Chancellor agreed to the change in the rate.

Mr. Stanley: Ours could have been.

The Chairman: No, the distinction between the two Clauses is a very clear one. The right hon. Gentleman's new Clause is dependent on a second hypothesis namely the increase of the duty on oils and it is on that date that the date on which the new motor vehicle duties are to come into operation would depend.

8.30 p.m.

Captain Crookshank: On the point I was submitting, Major Milner, about imposing the charge, can the secret now be revealed?

The Chairman: I can only tell the right hon. and gallant Gentleman that this new Clause might impose a charge. The right hon. and gallant Gentleman knows as well as I do that that is one of the grounds on which a new Clause may be ruled out of Order and that being so, I have ruled it out of Order.

Captain Crookshank: I agree with you, Major Milner, if I may respectfully say so, that that is the normal ground for ruling a Clause out of Order. All I was trying to find out was, what in this Clause calls for that Ruling. I am sorry, but I still consider it must be some secret.

The Chairman: Mr. Daggar.

NEW CLAUSE.—(Tax allowance for domestic help in certain cases.)

Where a taxpayer is compelled through the physical or mental incapacity of a parent to maintain or contribute towards the maintenance of another member of the family in order to provide adequate domestic help such taxpayer shall be entitled to a tax allowance

of fifty pounds per annum in respect of such relative in addition to any allowance payable in respect of the parent.—[Mr. Daggar.]

Brought up, and read the First time.

Mr. Daggar: I beg to move, "That the Clause be read a Second time."
I am not very optimistic about this new Clause being accepted by the Chancellor, in view of the treatment meted out to the first new Clause moved this afternoon, which involved a similar principle. While it is difficult to decide which of the two is more important, I think that the circumstances in this Clause, which I have taken into consideration as the result of a case brought to my notice, deserve more sympathetic consideration by the Chancellor. A typical case for which this new Clause provides is that of a single woman who is in full-time employment. She has an invalid father of 76 years of age who has suffered from cardiac debility for a number of years. Lately, in addition to becoming totally deaf, he has developed a cataract on one of his eyes, and these disabilities have necessitated another sister looking after the home and the father. I ask that some tax relief shall be allowed in such cases. There are not many such cases which would be covered by this Clause, and I hope we shall not be told by the Financial Secretary that there is a danger, in making a concession of this kind, that it may be applied to other cases, because on the Order Paper it is definitely stated that this is a tax relief which shall apply in certain cases. In addition, I am beginning to think that all the money available for concessions on such cases as this has been given to the Opposition, because the first Amendment moved to the Finance Bill involved a concession amounting to £1,500,000, so that it does not appear that there is any money available to meet such hard cases as this. I ask the Chancellor, in view of the fact that there cannot be many such cases, that a hard case like this may be provided for by making the concession asked for in the new Clause.

Mr. Glenvil Hall: The arguments against my right hon. Friend accepting this new Clause have already been put from this Box, in part by myself and later, by my right hon. Friend, The Debate ranged fairly widely, and there is very little I can say now if I am not to repeat most of what was said by my right hon. Friend or by others in the earlier Debate. This new


Clause ranges a little wider than some of the others, in that it would allow the employment of a housekeeper, who need not be resident, and also other domestic assistance. "Other domestic assistance" may mean any kind of help. My right hon. Friend is extremely sympathetic towards the case which has been put forward, but, in our view, the cases which have been put before the Committee today cannot be assisted in the way suggested by the mere extension of the housekeeper allowance. We must help people of that kind in some other way.
As my right hon. Friend pointed out, the new social security code, which comes into full operation during the next year, will assist quite a number of these cases. In addition, if, when that code has been put into operation, there are cases which need help, and which are not caught up by that legislation—and it covers a very wide field—I can assure the Committee that my right hon. Friend will be only too willing to look at them. People who need help in their homes are not the only people who need help, and it may be that people whom my hon. Friend is anxious to help would not be helped by this new Clause. In the last two Budgets my right hon. Friend has taken well over two million people out of the range of Income Tax. Many of these people, too, could not be helped in their homes, but would need to go to nursing homes, and this Clause could not help them. We cannot accept this Clause because of this, and the other reasons which have been advanced, and also because of my right hon. Friend's promise that next year, or as and when the new social security code operates, he will look with the utmost sympathy at the circumstances in which an allowance of this kind would help.

Mr. Stanley: I want to make quite certain that what the Financial Secretary has said has not in any way detracted from the promise the Chancellor gave on a new Clause which was moved earlier. The words of the Financial Secretary seemed a great deal colder and much more hedged round with provisos than the words of the Chancellor, on the strength of which we forebore to press a previous Clause to a Division. He said first that the law in respect of these cases was not satisfactory, that in many cases help was being given in a different way, but not in all, and that, without waiting for codes

to come into effect or anything else, the right hon. Gentleman would, between now and his next Budget, consider these and other cases, and in the next Budget he would be prepared to give us the result of his conclusions. I only wanted to make certain that what I then considered a satisfactory promise is not now being whittled down in any way.

Mr. Dalton: No, Sir, that is quite correct. My right hon. Friend did not intend, in the words he used to diminish that. For the sake of clarity, I repeat, for the second time, what I said. There will come into operation in the coming months our new schemes of social insurance. We have also made various improvements this year. In the light of these two changes, shall be glad, between now and next year, to consider the group of hard cases, some of which, but not all of which, have been raised today, and make submissions to the House in due course.

Mr. Daggar: I beg to ask leave to withdraw the Motion.

Motion and Clause, by leave, withdrawn.

The Chairman: I would like to refer to the point raised a little while ago by the right hon. Member for West Bristol (Mr. Stanley) as to the circumstances in which a Clause could, by leave, be withdrawn. I have refreshed my memory, and lie was quite right. The Question might have been put at once from the Chair, after leave to withdraw had been sought by the Mover. As, however, I had not proposed it or taken the pleasure of the Committee in regard to the withdrawal of the new Clause, it was competent for me to do so notwithstanding the intervention of the hon. Member for Leominster (Mr. Baldwin). The right hon. Gentleman was, therefore quite right, and I am obliged to him.

NEW CLAUSE.—(Relief for fixed preference dividends in connection with double taxation.)

Paragraph (a) of Subsection (2) of Section fifty-two of the Finance (No. 2) Act, 1945 (which limits the rate at which relief or repayment may be allowed in respect of tax deducted from certain dividends) shall be amended by the insertion, immediately after the words, "such dividends," of the words "other than a preference dividend," and by the addition at the end of the said paragraph (a) of the following words:


In this Subsection the expression "Preference dividend" means a dividend receivable at a fixed gross rate per cent. payable in priority to all dividends on some other class of share but shall not include so much of any such dividend as represents some further participation in profits over and above the said fixed gross rate per cent. —[Mr. Birch.]

Brought up, and read the First time.

Mr. Birch: I beg to move, "That the Clause be read a Second time."
This Clause seeks to amend Section 52 of the Finance (No. 2) Act, 1945. That Section laid down two things which are material to this new Clause. It laid down first that taxation should be deducted at the full standard rate from dividends notwithstanding any allowance to which a company might be entitled for double taxation relief. That Section made an alteration to the existing practice, which was laid down by Section 27 of the Finance Act, 1920, which had the effect of passing on directly to the shareholder any relief there might be in respect of Dominion Income Tax relief. The second effect was that a repayment which anyone, who was entitled to a dividend, could get, was limited to what was described as the net United Kingdom rate payable by the company, that is, the tax payable by the company after taking into account double taxation relief.
The effect of that is that the whole of the benefit from any Dominion Income Tax relief there might be goes to the equity shareholder, not, as it previously did, both to the preference shareholder and the equity shareholder. It may be said that there is nothing wrong in principle in its going to the equity shareholder. But it has an effect about which there has been a good deal of correspondence. I have carried on an acrimonious correspondence with the Financial Secretary to the Treasury on the matter. It has an effect which is very unfair. Supposing there is a person who holds preference shares in a company which is entitled to double taxation or Dominion Income Tax relief. From his dividend he has deducted, Income Tax at the full standard rate of 9s. Supposing that company is liable to taxation only at 7s. 6d. in the £, arid supposing the holder of the preference shares is not liable to taxation at all, owing to the fact that his income does not amount to the requisite figure, what happens is that instead of being able

to reclaim the full tax which has been charged at 9s. in the £, he can only reclaim tax at 7s. 6d. Therefore, it means that somebody who is not liable to Income Tax at all is paying tax at 1s. 6d. in the pound. That seems to be inequitable and wrong. Probably it was not intended when the Finance (No. 2) Act, 1945, was passed. I hope that it may be put right.

8.45 p.m.

The Solicitor-General (Sir Frank Soskice): As the hon. Gentleman said, in effect a person who holds shares in a company and who is entitled to foreign Income Tax relief and to repayment of the tax on these shares, because his income is below the tax level, has to pay the amount of the foreign tax. I will explain in terms of figures what I mean by that. Indeed, I am really repeating what has been said. Suppose there is a company which pays 2s. foreign tax and, therefore, by virtue of the Section in the 1945 Act to which the hon. Gentleman referred, has to pay only an additional 7s. British tax—that is to say, that 2s. and the 7s. make up the 9s. tax—it is the case that a shareholder in that company who is entitled to tax relief because his income is a low one, only gets back 7s. He has 9s. deducted from his dividend, but he only gets back 7s.
If hon. Gentlemen will consider the matter further, I think they are bound to recognise that it is quite inevitable. If the Revenue pay not 7s. but 9s., the Revenue will pay the shareholder 2s. which it never receives. What happens is that the company pays the 2s. foreign tax. It then deducts 9s. from the dividend, so that the company pays nothing. It reimburses 2S. foreign tax and the 7s. British tax, so that the company is reimbursed by deducting the 9s. from the dividend. If the Revenue then pay back to the shareholder the full 9s., it means that the Revenue will be paying to the shareholder 2s. which it has never received, namely, the 2S. which the company has paid to the foreign Government, and which has never gone into the coffers of the Inland Revenue. That is a position which cannot be accepted. Obviously, the British Revenue cannot be expected to pay back anything beyond what it has received out of the shareholder's dividend.
The hon. Gentleman made reference to Section 27 of the Finance Act, 1920. As


he said, that was the Act which dealt with Dominion tax relief. When that Act was in force, there was no other form of relief for double taxation in respect of tax paid to a Dominion or foreign government except the relief which was afforded under that Section. What happened under that section was that the company deducted only am assuming that the rate of tax is constant at 9s.—from the shareholder's dividend. The effect of that was that the equity shareholder was unfairly treated. It meant not that the shareholder was paying the 2s. foreign tax, but that the company was paying. If hon. Members will picture the state of affairs, it is that the company paid 2s. abroad. It then paid 7s. at home, and it deducted only 7s. from the dividend. The net result of that was that the 2s. was borne by the company, that is by the ordinary shareholders, and it was lifted off the shoulders of the preference shareholders That was a position which could not be allowed to obtain, and therefore we adopted the present system for the purposes of the 1945 Act.
The remedy, I would say, is this. I quite agree that the preference shareholder is entitled to repayment, because he suffers a loss of 2s., but there is nothing to prevent him changing his preference shares into ordinary shares. Hon. Members might say that that is not fair to him because he suffers a loss, in that preference shares are worth less and he suffers a loss in their capital value, and that if he does change his shares, because of this difference he is bound to suffer a loss. I think, however, that that is not quite correct, because the shareholder who is entitled to relief in respect of his dividends is always a very small shareholder, and I think the experience of the Stock Exchange—or so I am informed—is that, ordinarily, the value of his share is not governed by the very small shareholder—the one whose holding is very small and whose total income is very small, and who is entitled to relief on the dividends on his shares. The value is governed by the large shareholders, and, therefore, my answer is that the small shareholder who changes his shares will not necessarily suffer a loss, because the capital value of his shares is ordinarily determined by the larger shareholders.
This, however, is true—that the shareholder who was paying tax under the old

system, that is, the system in force under Section 27 of the 1940 Act, and who now comes, in consequence of the new Act, under the new system, does suffer a loss on preference share dividends. The answer to that really is that when his preference share was taxed upon the basis of Section 27 of the 1940 Act, he was getting, as part of the dividend on his preference share, an uncovenanted benefit, and his preference share was then standing at a slightly enhanced value. Therefore, I say that the preference shareholder is not being dealt with unfairly. I agree that this matter is difficult to follow, but I hope hon. Members have been able to follow me. We feel that the preference shareholder is not unfairly dealt with, as he can change his share. If he got back the full amount of 9s., he would be getting it back at the expense of the ordinary shareholder to the extent of the 2s. paid by way of foreign tax. Therefore, I ask the Committee to reject the new Clause.

Mr. Birch: I would like to make one or two comments on what the learned Solicitor-General has said. The hon. and learned Gentleman started by saying that the effect of accepting the new Clause would be that the Revenue would be paying the tax, or I should say that it would be receiving less, and that, if we accept any form of double taxation relief, the Revenue does automatically receive less than it would otherwise have done. I do not see that there is really any point there at all. Then, the Solicitor-General said how unfair it would be—

The Solicitor-General: I am sorry to interrupt the hon. Gentleman, but not only does the Revenue receive less in the case of the 7s. instead of 9s., but, if the preference shareholder received the 9s., the Revenue would, in addition, be paying an extra 2s. which it would never have received, and would, therefore, suffer a double loss.

Mr. Birch: That is a very subtle point. Surely, what the Revenue is now doing is to extract from somebody taxation which he is not bound to pay because, to take the Solicitor-General's example, somebody is being made to pay tax at 2s. in the pound when, in fact, he is not bound to pay tax at all. The Revenue is collecting extra revenue. We were told how unfair this new Clause would be to the


equity shareholders. I am glad the Solicitor-General is now a convert to our case on the Profits Tax, and I hope that on the Report stage he will argue that at greater length. We were then told that there was no hardship on these people—and we are talking about very small people—because, although the hon. and learned Gentleman said he did not know much about the Stock Exchange, he stated there was no reason why a holder of these shares should not exchange them for ordinary shares.
Two arguments present themselves. First of all—and this Budget makes the position much worse—the expense of changing a small holding is heavy. The Stamp Duty is doubled and that means an increase from one per cent. to two per cent., to start with. The commissions on small holdings are large. Therefore, it is expensive to change small holdings of preference shares into ordinary shares. Secondly, many of these investments are held under trust deeds, and, although a preference share is not strictly a trustee security, there are many trust deeds which stipulate that one may invest in preference shares and not in ordinary shares. Therefore, it may not be possible to make this' exchange at all. One of the big arguments for the small savings campaign is that the small person cannot afford the risk of an ordinary share. It is all very well for the Solicitor-General to say that a small shareholder can contract out by taking an ordinary share, but many of these people cannot afford to take the risk. Therefore, that course is not open to them. I thought the Solicitor-General's case was not a good one. This tax has caused considerable resentment among many people with small incomes, and I think it is grossly unfair.

Mr. Assheton: I hope the Chancellor of the Exchequer will give his mind to this matter and say whether he entirely concurs in the case which the learned Solicitor-General adduced. I thought my hon. Friend the Member for Flint (Mr. Birch) put forward a strong case. It is certainly not one in which there is any party interest. It is purely a matter of trying to make up our minds on what is the fair thing to do. I think I understood, but I would not be certain, the first of the arguments

Which the hon. and learned Gentleman used. I am not so certain that I appreciated his second argument, and I think my hon. Friend's criticism of that second argument contained a good deal of substance.
It is no remedy to a class of share holders who are called upon to bear a tax which they regard as unjustifiable to be told that they can exchange one class of share for another class. It would mean that some other shareholder would be left with the preference shares which the first man sold. We must look at the matter from the point of view of the whole class of shareholders concerned. It is not right to say, "If you are dissatisfied with the system of taxation which is imposed on preference shareholders, you should cease to be a preference shareholder." That is a weak argument. In addition, my hon. Friend exposed the practical difficulties of exchanging from preference to ordinary shares by pointing out the expense in which it would involve the shareholder, and by pointing out that it might be that the shareholder might not by himself be entitled on account of circumstances, or because of the trust deed by which the investment was governed, to make such an exchange. I suggest that, in addition to those arguments, one can very reasonably say that the ordinary shares which would be purchased in exchange for preference shares are now standing relatively higher in relation to preference shares than they were before this law was made.
9.0 p.m.
The hon. and learned Gentleman said that these preference shareholders in the past got uncovenanted benefit. Even on the assumption that the hon. and learned Gentleman is right and they got the uncovenanted benefit, the holders who bought the shares when they were getting that uncovenanted benefit, of course, paid a higher price than they would have done if that benefit had not attached to those shares. Similarly, if they exchanged them for ordinary shares now, they would pay a higher price than the shares stood at, because the ordinary shares are getting the benefit of whatever disadvantages the preference share§ are suffering. Therefore, I find it difficult to accept the conclusion that these arrangements are fair to the preference shareholders in companies


which enjoy the benefits of these double taxation arrangements. For these reasons, I support the arguments put forward by my hon. Friend.

Question put, "That the Clause be read a Second time."

The Committee divided: Ayes, 94; Noes, 258.

Division No. 256.]
AYES
[9.2 p.m.


Amory, D. Heathcoat
Harvey, Air-Cmdre. A. V
Raikes, H. V.


Assheton, Rt. Hon. R.
Herbert, Sir A. P.
Ramsay, Maj. S.


Baldwin, A. E.
Hinchingbrooke, Viscount
Rayner, Brig, R.


Barlow, Sir J
Hogg, Hon. Q.
Reed, Sir S. (Aylesbury)


Baxter, A. B.
Holmes, Sir J. Stanley (Harwich)
Robinson, Wing-Comdr Roland


Bennett, Sir P
Hope, Lord J.
Ropner, Col. L.


Birch, Nigel
Howard, Hon. A.
Ross, Sir R. D. (Londonderry)


Bower, N.
Hurd, A
Sanderson, Sir F.


Braithwaite, Lt.-Comdr. J. G.
Hutchison, Lt.-Com. Clark (E'b'gh, W)
Shepherd, W. S. (Bucklow)


Bromley-Davenport, Lt.-Col W
Hutchison, Col, J. R. (Glasgow, C)
Stanley, Rt. Hon. Q.


Buchan-Hepburn, P. G. T.
Jeffreys, General Sir G.
Stoddart-Scott, Col M.


Bullock, Capt. M
Joynson-Hicks, Hon L. W.
Stuart, Rt. Hon J (Moray)


Carson, E
Keeling, E. H
Sutcliffe, H


Clarke, Col R. S
Langford-Holt, J.
Taylor, C S. (Eastbourne)


Clifton-Brown, Lt.-Col. G.
Lindsay, M. (Solihull)
Taylor, Vice-Adm, E. A. (P'dd't'n, S.)


Conant, Maj. R. J. E.
Lucas-Tooth, Sir H.
Thorneycroft, G. E. P. (Monmouth)


Corbett, Lieut-Col U (Ludlow)
Macdonald, Sir P. (I. of Wight)
Thornton-Kemsley, C N.


Crookshank, Capt. Rt. Hon H F. C
Mackeson, Brig. H. R.
Touche, G. C.


Crosthwaite-Eyre, Col O. E.
Maclay, Hon. J. S.
Vane, W M F.


Cuthbert, W. N
Maitland, Comdr. J. W
Wakefield, Sir W W


Digby, S. W.
Manningham-Buller, R. E
Walker-Smith, D


Dower, Lt.-Col A. V. G. (Penrith)
Marples, A. E
Ward, Hon G. R


Drewa, C.
Marshall, D. (Bodmin)
Wheatley, Colonel M. J


Dugdale, Maj. Sir T. (Richmond)
Mellor, Sir J.
White, Sir D (Fareham)


Eccles, D. M.
Morrison, Maj. J. G. (Salisbury)
White, J. B (Canterbury)


Fletcher, W. (Bury)
Mott-Radclyffe, Maj. C E
Williams, C (Torquay)


Fraser, Sir I (Lonsdale)
Nicholson, G.
Willoughby de Eresby, Lord


Gage, C
Noble, Comdr A. H. P.
Winterton, Rt. Hon Earl


Gammans, L. D.
Peake, Rt. Hon. O.



Glyn, Sir R.
Peto, Brig C. H. M.
TELLERS FOR THE AYES:


Gridley, Sir A
Pitman, I. J.
Mr. Studholme and


Grimslon, R. V
Poole, O B. S (Oswestry)
Lieut.-Colonel Thorp.


Harmon. Sir P. (Moseley)
Prior-Palmer, Brig, D.





NOES


Adams, Richard (Balham)
Gallaghan, James
Fernyhough, E,


Adams, W T (Hammersmith, South)
Champion, A. J.
Fletcher, E G M. (Islington, E.)


Allen, A. C. (Bosworth)
Chater, D.
Follick, M.


Alpass, J. H.
Cobb, F. A.
Foot, M. M.


Attewell, H. C.
Cocks, F. S.
Forman, J. C.


Austin, H. Lewis
Coldrick, W.
Foster, J. G. (Northwich)


Awbery, S. S.
Collins, V J
Fraser, T (Hamilton)


Ayles, W H.
Colman, Miss G. M.
Gaitskell, H T N


Ayrton Gould, Mrs. B.
Comyns, Dr. L.
Ganley, Mrs. C. S.


Bacon, Miss A.
Cooper, Wing-Comdr. G
Gibbins, J.


Baird, J.
Corlett, Dr J.
Glanville, J E. (Consett)


Balfour, A
Corvedale, Viscount
Goodrich, H. E.


Barstow, P G
Cove, W. G
Greenwood, A. W. J. (Heywood)


Barton C
Crawley, A
Grenfell, D. R.


Battley, J. R.
Crossman, R. H. S.
Grey, C F


Bechervaise, A E
Daggar, G.
Grierson, E


Benson, G
Daines, P
Griffiths, D. (Rother Valley)


Berry, H
Dalton, Rt. Hon. H.
Griffiths, Rt Hon J. (Llanelly)


Beswick, F.
Davies, Edward (Burslem)
Gunter, R. J


Bing, G. H. C
Davies, Ernest (Enfield)
Guy, W. H.


Binns, J.
Davies, Harold (Leek)
Haire, John E. (Wycombe)


Blackburn, A. R
Deer, G.
Hale, Leslie


Blenkinsop, A
Diamond, J.
Hall, W. G.


Blyton, W R.
Dobbie, W.
Hamilton Lieut.-Col. R


Bottomley, A. G
Dodds, N. N
Hannan, W (Maryhill)


Bowden, Flg.-Offr. H. W
Donovan, T.
Hardy, E. A


Bowles, F. G. (Nuneaton)
Driberg, T. E. N.
Harrison, J.


Braddock, Mrs E M. (L'pl. Exch'ge)
Dugdale, J. (W. Bromwich)
Hastings, Dr Somerville


Braddock, T (Mitcham)
Dumpleton, C W
Henderson, A. (Kingswinford)


Brook, D (Halifax)
Dye S.
Henderson, Joseph (Ardwick)


Brooks, T J (Rothwell)
Ede, Rt. Hon J C
Herbison, Miss M


Brown, George (Belper)
Edelman, M.
Hobson, C. R.


Brown, T J (Ince)
Edwards, N (Caerphilly)
Holman, P


Brown, W. J. (Rugby)
Evans, E (Lowestoft)
Holmes, H. E. (Hemsworth)


Bruce, Maj. D. W. T.
Evans, John (Ogmore)
House, G


Burden, T. W.
Evans, S N (Wednesbury)
Hoy, J.


Burke, W A
Ewart, R.
Hudson, J. H. (Ealing, W.)


Butler, H W (Hackney, S.)
Fairhurst, F.
Hughes, Hector (Aberdeen, N.)


Byers, Frank
Farthing, W. J.
Hutchinson, H. L. (Rusholme)




Hynd, J. B. (Atteroliffe)
Neal, H. (Claycross)
Steele, T.


Irving, W. J.
Nichol, Mrs. M. E. (Bradford, N.)
Stewart, Michael (Fulham, E.)


Janner, B.
Noel-Baker, Capt. F. E. (Brentford)
Strachey, J.


Jeger, G. (Winchester)
Noel-Buxton, Lady
Summerskill, Dr Edith


Jeger, Dr. S. W. (St. Pancras, S.E.)
Oliver, G. H
Swingler, S.


Jones, D T (Hartlepools)
Paget, R. T.
Sylvester, G O.


Jones, Elwyn (Plaistow)
Paling, Rt. Hon. Wilfred (Wentworth)
Symonds, A. L.


Jones, P. Asterley (Hitchin)
Paling, Will T. (Dewsbury)
Taylor, H. B. (Mansfield)


Keenan, W.
Palmer, A. M. F
Taylor, R. J. (Morpeth)


Kenyon. C
Pargiter, G. A
Taylor, Dr. S. (Barnet)


Key, C. W
Parker, J.
Thomas, D. E. (Aberdare)


Kinley, J.
Parkin, B. T.
Thomas, Ivor (Keighley)


Kirby, B. V.
Paton, J. (Norwich)
Thomas, I. O. (Wrekin)


Lang, G.
Pearson, A.
Thomas, George (Cardiff)


Lee, F. (Hulme)
Peart, Thomas F.
Thorneycroft, Harry (Clayton)


Leslie, J. R
Poole, Major Cecil (Lichfield)
Thurtle, Ernest


Levy, B. W.
Porter, E. (Warrington)
Tolley, L.


Lewis, A. W. J. (Upton)
Porter, G. (Leeds)
Tomlinson, Rt. Hon. G


Lewis, J. (Bolton)
Price, M. Philips
Turner-Samuels, M.


Lipson, D. L.
Pritt, D. N.
Ungoed-Thomas, L.


Lipton, Lt.-Col. M.
Proctor, W. T.
Vernon, Maj. W. F


Longden, F.
Pryde, D. J.
Viant, S. P.


Lyne, A W
Pursey, Cmdr. H
Wadsworth, G


McAdam, w.
Randall, H. E.
Walkden, E.


McEntee, V. La T.
Ranger, J
Wallace, G. D. (Chislehurst)


McGhee, H. G
Rees-Williams, D. R.
Wallace, H. W. (Walthamstow, E.)


Mack, J. D.
Reeves, J.
Warbey, W. N.


McKay, J. (Wallsend)
Reid, T. (Swindon)
Weitzman, D


Mackay, R. W. G (Hull, N.W.)
Richards, R.
Wells, W. T. (Walsall)


McLeavy, F.
Robens, A.
West, D. G.


Macpherson, T. (Romford)
Roberts, Emrys (Merioneth)
White, H. (Derbyshire, N.E.)


Mallalieu, J. P W.
Roberts, W. (Cumberland, N.)
Whiteley, Rt. Hon. W


Manning, Mrs. L. (Epping)
Royle, C.
Wilkins, W. A.


Marshall, F. (Brightside)
Sargood, R.
Willey, F. T. (Sunderland)


Mathers, G.
Scollan, T.
Williams, D. J. (Neath)


Mellish, R. J
Shackleton, E. A. A
Williams, J. (Ketvingrove)


Messer, F
Sharp, Granville
Williams, Rt Hon. T. (Don Valley)


Middleton, Mrs. L
Shawcross, C. N. (Widnss)
Williams, W R. (Heston)


Mikardo, Ian
Shawcross, Rt. Hon. Sir H. (St. Helens)
Willis, E.


Millington, Wing-Comdr. E. R
Simmons, C. J.
Wills, Mrs. E. A


Mitchison, G. R
Skeffington, A. M.
Woodburn, A.


Moody, A. S.
Skinnard, F. W.
Woods, G. S


Morley, R.
Smith, C. (Colchester)
Wyatt, W.


Morris, P. (Swansea, W.)
Smith, H. N. (Nottingham, S.)
Yates, V. F.


Mort, D. L.
Sorensen, R. W.
Young, Sir R. (Newton)


Moyle, A.
Soskice, Maj. Sir F.
Zilliacus, K.


Murray, J. D
Sparks, J. A.



Naylor, T. E.
Stamford, W
TELLERS FOR THE NOES




Mr. Collindridge and Mr. Snqw

NEW CLAUSE.—(Relief for tenants on the maintenance of property.)

(1) For the purposes of Rule 8 of No. V of Schedule A as amended by Section thirty-two of the Income Tax Act, 1945 (which grants relief in respect of maintenance, repairs, insurance and management of property), a person occupying any premises as the tenant thereof shall be treated as if he were the owner thereof if, under the covenants contained in the lease or agreement by virtue of which he occupies the premises, the whole of the burden of repairing the premises falls upon him.

(2) The provisions of this Section shall have effect as from the sixth day of April, nineteen hundred and forty-seven, and accordingly in Subsection (1) of Section thirty-three of the Income Tax Act, 1945, the words "or, in the case of expenditure by a tenant could, if he had been the owner," shall be omitted.— [Viscount Hinchingbrooke.]

Brought up, and read the First time.

Viscount Hinchingbrooke: I beg to move, "That the Clause be read a Second time."
This Clause is in identical terms, except for the relevant change in date, to the

Clause which was moved last year, when we had a very useful discussion in Committee and on Report. After the Solicitor-General had refused to accept the principle involved, my right hon. Friends the Members for the City of London (Mr. Assheton) and the Scottish Universities (Sir J. Anderson) were good enough to intervene, and the Chancellor of the Exchequer was sufficiently impressed by what they said to promise to look into the whole matter before this year. I have put this Clause down for that reason. I do not want to delay the Committee by repeating last year's arguments in detail, because they are well known to the Government. I can only hope that the Government will be able to be more forthcoming than on the previous occasion. I ought to disclose an interest in this matter. Like my right hon. Friend the Member for the Scottish Universities, I occupy a property which might be affected by any concession although—so anomalous is the


law—I do not know that I may not in fact be covered by existing practice.
9.15 p.m.
The object of the Clause is to apply the ordinary Schedule A procedure of the maintenance claims to tenants with a repairing lease. As I said, the law is anomalous. I do not think the Solicitor-General would object if I told the Committee that I received a letter from him a year ago, in which he said that the position of the leaseholder with a lease over 50 years was covered by the Finance Act, 1940, and that as a result of that Act long leaseholders with repairing leases were able to put into the Revenue a maintenance claim, and get back tax against it. The hon. and learned Gentleman referred me in that letter to Section 17 of the Finance Act, 1940. I have read that Section through time and time again, and I have taken advice on it, but I cannot see that the long leaseholder is covered. I have searched through the Debates of 1940 both on the Budget Resolutions, Committee and Report stages, and on the Finance Bill itself, Second Reading, Committee and Report stages, and I can find no argument adduced there in support of that Section. So it is impossible to disentagle the situation. I suppose that in 1940 England was otherwise occupied, and hon. Members did not have much time to discuss a matter of this kind; anyhow that Section went through with no debate whatever.
That being the case, I would like to ask the Solicitor-General, here and now, what precisely is the legal foundation for the undoubted fact that long-term leaseholders with repairing leases can, and do, get relief of tax on the amount they spend in keeping their property in good repair? Practice, if not the law itself, has already admitted the principle that some tenants of property should be relieved of tax on maintenance. That, I believe, opens the door to this Clause. Last year, the Solicitor-General made two points in refutation of the case I sought to make. The first was that tenants who have a beneficial interest in the property, that is to say, those who pay less rental than the Schedule A assessment, can put in a maintenance claim of the amount by which tax and Surtax thereupon equals the difference between the assessment and the rent. Of course, that is clearly so. We all know that to be part of the law. But how many

do benefit from this, especially in these times of high cost of repairs? I am sure it is within the experience of every Member of this House that landlords are so hard hit by taxation, and the housing shortage itself is so great, that landlords are concluding agreements today which charge rents equal to or, indeed, above the Schedule "A" assessment, and, in addition, saddle their tenants with the cost of repair. Tenants in this position have to maintain the property out of their net income. Again, taxation being what it is, the same principle hits the tenant as it does the landlord, and they do the very minimum necessary to keep their properties in good repair.
The second point made by the Solicitor-General, the real gravamen of his case against the Clause, was that a tenant with a repairing lease would enjoy a rent proportionately lower than the tenant without a repairing lease. Does the hon. and learned Gentleman suggest that the market in houses is now so free that there is room for nice calculation between landlord and tenant about rents? Does he really think that landlords are today bargaining lower rents against the tenant's liability for repairs? I am sure that is not so, and all the advice I have sought on this goes to prove it. I am not a great believer in rent restriction, because I think it operates harshly in many cases, but it has certain advantages. In the uncontrolled market of today landlords are getting away with high rents and also no liability for repairs. Rent restriction may be good politics in some cases but, unfortunately, it does not help with this Clause at a11. Obviously, there are very few rent restricted tenants who have repairing leases.
I am sorry that the hon. Member for Oldham (Mr. Hale) is not in his place, because he was here last year and made a forthright speech against this Clause. He said that it would result in landlords everywhere refusing anything but repairing leases and thus getting out of their normal obligations. I believe that there are several reasons why that would not happen. The first is that this Clause is really concerned with the short lease and not with the long lease. Landlords are bound to be chary of granting short repairing leases to a series of different tenants who might well over a period of


time after the whole character of the property. Incidentally, they might alter it in such a way as greatly to improve the value of the property, thus putting up the assessment and increasing the tax on the landlord. Secondly, I would say to hon. Members who take that view that this Clause clearly does not affect landlords. It is an arrangement entirely between the tenant and the Inland Revenue. If I were asking the Chancellor of the Exchequer to make things harder for landlords than he does now, landlords might well be expected to do what the hon. Member for Oldham suggested last year and discharge some of their obligations upon their tenants.
I ask now, as I asked last year: Is it in the national interest to have a distinctive class of property—houses let to tenants on a repairing lease for short periods—depreciating in comparison with other property because the cost of upkeep has to be met out of net income instead of gross income, for that is what it amounts to? In the case of a landlord he repairs his property out of gross income and in the case of tenants with repairing leases they are forced to do that out of net income and, therefore, there is this disincentive to repair. Surely, it must be the property and not the taxpayer which counts? The law ought to be framed so that property of all kinds carries the same financial stimulus to repair and takes no account whatever of the status of the occupier. I hope that the Government has been able to give this consideration in the last year, and I hope that we can advance a further stage this evening than we were 12 months ago.

The Solicitor-General: I am sorry that after very careful consideration we feel that we are not in a position to accept the new Clause. The noble Lord asked me, at the outset of his speech, to indicate the relevance of Section 17 of the Finance Act, 1940, and I gathered from what he said that he could find no trace of any relevance in that Section after reading it several times. I am wondering whether he was looking at the Finance (No. 2) Act, 1940, or looking at the wrong Section. The Section begins:
This Section applies to the following payments, that is to say (a) rents in long leases".
and if the noble Lord will turn to Section 13 he will see that a long lease is defined

as a lease granted for a term exceeding 50 years. Clearly, the Section at least relates to long leases, and it says that a tenant with a long lease, that is to say a lease of over 50 years, shall be in a position similar to the actual owner, the freeholder, in that he can treat the ground rent he has to pay as a deduction against his general income. It says that the ground rent and certain other annual payments referred to in that Section shall be charged under Case VI of Schedule D, which is the Case which applies, to other general income, to be treated for the purposes of such of the provisions of the Income Tax Acts as apply to royalties paid for the use of a patent as if it were a royalty. That means to say that it attracts the provisions of Rules 19 and 21.
The Section says that a tenant with a long lease can deduct the ground rent that he pays from his general income and treat it as a charge under Rules 19 and 21 of Schedule D, and of course the owner of property can do very much the same thing with regard, for example, to the interest he pays on a mortgage he may have taken out on a property. He can treat the mortgage interest as a charge upon his general income in exactly the same way as, by Section 17, a tenant is allowed to treat his ground rent as a charge against his general income for the purpose of tax deduction. May I now go back to what was said before when the matter was discussed and see where we are? It appeared that the argument propounded by the noble Lord—

Viscount Hinchingbrooke: Will the hon. and learned Gentleman say where the word "repairs" occurs in Section 17, because the whole case rests upon the right of the tenant to make repairs?

The Solicitor-General: It does not appear, but the landlord, and the tenant on a long lease, can use the whole of his Schedule A tax against which to deduct his maintenance, whereas if it were not for Section 17 the tenant on a long or short lease—I am talking about long leases for the moment—could only deduct his maintenance repairs from the difference between his Schedule A tax and the amount he has to pay. That is the relevance of that Section. Suppose we are talking of a tenant with a short lease, that is to say a tenant who does not come within Section 17. If he has a beneficial interest, and


holds property at a rent less than the annual Schedule A value, he is allowed to deduct his maintenance repairs from his Schedule A tax but, it will work out in practice, only against the difference between the Schedule A tax and the rent he pays his landlord, so that he is in a position, as the noble Lord pointed out, which does not really fully indemnify him against his maintenance claim.
What the noble Lord wants to be done, and what he is asking should be done, is that the tenant on a short lease should be treated exactly as if he were a tenant on a long lease, in other words, that Section 17 should be extended to include a tenant on a short lease, that is to say, a lease of less than 50 years. That, I submit, is a proposition which really cannot possibly be accepted, because what would it mean? It would mean that one would be committed to treating all rent as a deduction against profits, even if it was rent paid for the occupation of private premises. When a tenant undertakes repairs, when, to quote the words of the noble Lord's new Clause, he shoulders the whole burden of repairs, what is he in effect doing? He is in effect paying an extra rent, as the market operates—I do not say that it operates with complete accuracy, I accept that, as the noble Lord said—and as the market operates in the long run, the tenant who does repairs pays proportionately less rent over a long period. When there is a normal market, and I am not talking about an abnormal market, if he does the repairs he pays proportionately less rent.
Therefore, if you are going to say with regard to a tenant on a short lease that he must be allowed to treat his repairs as a deduction against his general income, as can a tenant on a long lease, you are in effect saying that all rent should qualify as a deduction against general income or as against profits. If you say that, what logical distinction can you draw between rent and any number of other personal payments? Take the case of keeping one's family—one cannot use that as a deduction against one's profits or income, one has to pay that out of one's net income, to use the noble Lord's phrase. If you can treat the rent you pay for your private premises as a deduction, logically you can draw no distinction between that sort of payment for your personal needs and any other payment for the upkeep of your family, for the education of children,

or any other personal payment you may make.

9.30 p.m

Viscount Hinchingbrooke: I am not claiming such a right for the owner. I am only claiming a right of maintenance. I am not going into the question of family at all.

The Solicitor-General: What the noble Lord is saying is that a tenant on a short lease should be treated in the same position as an owner or as a tenant on a long lease coming within Section 17. What I am saying is that if that is accepted, then we must equally accept as a matter of logic a whole lot of other personal demands. They also would qualify as deductions, for there is no distinction in principle at all. The two things are heterogeneous. The noble Lord said "You have already done it in the case of the long lease holder." That is perfectly true, but that has been done because a period of 50 years has been selected as drawing the dividing line 'between the person who is really a tenant in the accepted sense and a person who, because of a long period, approximates more closely to an owner. It may be said that the dividing line should be moved one way or the other, but it must be somewhere about the 50 year mark. It is drawn there in order to distinguish between a person who occupies property, who is really in the position of an owner, and a person whose grant is less than that and who really approximates to a real tenant.

Sir Hugh Lucas-Tooth: A dividing line is drawn so as to exclude a lease less than 50 years. Is that a lease run 50 years or is it one with still 50 years or more to run?

The Solicitor-General: It is rent payable on a long lease, that is to say, 50 years altogether.

Sir H. Lucas-Tooth: Originally?

The Solicitor-General: Yes. That is the argument in reply to that propounded by the noble Lord. We cannot accept his argument without allowing a lot of deductions which are indistinguishable from the demand he has put forward. Therefore, I am sorry that after very careful consideration we cannot accede to his proposal without opening the door so wide


that really one does not know what one would legitimately exclude if one accepted the principle of the Amendment.

Mr. Baldwin: I should like to put this point to the learned Solicitor-General. Take the case of an owner who has let his farm and his buildings on a repairing lease. The owner is allowed a statutory amount for repairs, and if he exceeds 12½ per cent. he can put in a maintenance claim. Suppose the tenant exceeds the 12½ per cent. and goes up to 25 per cent. who is going to get the extra 12½ per cent? It seems to me that the Income Tax authorities get away with the extra repairs done on the premises, for the landlord cannot claim because he had had his allowance and the tenant cannot claim them.

Mr. Assheton: I listened with great interest to the case made by the noble Lord and the answer by the Solicitor-General. I was not convinced at all by that answer, and I would like to explain to the Committee why I was not. First, there is an injustice in this differentiation. There may be two houses next door to each other in the same street. One house is let, say, on a weekly tenancy, the landlord remaining entirely liable for repairs. The house next door is let on a repairing lease for a shortish term of years. The first house, which is the landlord liability house, is in the position that any repairs that have to be clone can be set off against the income which the landlord receives from that house. If, therefore, the landlord receives an income of £50 per year and the repairs which he does over a period of five years average £20, the net taxable income is £30 a year. The house next door is let on a short repairing lease and the tenant, who is liable for repairs, cannot set off the cost of those repairs, nor can the landlord. The first house is, therefore, likely to be better maintained than the second house. Not only is there injustice in differentiation between those two cases, but there is bound to be neglect in the repair of property if this principle is assumed.
On those two grounds I suggest that the Committee should press the Government to accept the new Clause. Last year my right hon. Friend the Member for the Scottish Universities (Sir J. Anderson) made this case very well indeed, and supported the noble Lord. After all, the right hon. Gentleman spoke with all the

authority of an ex-Chancellor of the Exchequer and knew what he was talking about, and he did not make any mistakes in the case he put. I suggest that the Chancellor might look at this again before we come to a further stage in this Bill. As for precedents with which he might comfort himself, if he needs comfort of that kind, he could look at Section 33 of the 1945 Finance Act which does not distinguish between tenants and landlords, but gives them equal treatment. I am bound to say that I find it very difficult to see why this Government should be more tender to landlords than to tenants. Both justices and expediency demand that we should support this Clause.

Mr. C. Williams: The hon. and learned Gentleman seemed to base his case on the proposition that where there was a tenant who did the repairs, in the long run his rent would be lower than it would be if the landlord did the repairs. He went on from that proposition to say that if the Government opened the door here, they would have to allow a whole lot of other expenses. Surely, the position is totally different? What the Chancellor, above everyone else, would want to do would be to keep the houses in repair. He gains on Death Duties, among other things, and it is also desirable to keep up the standard of house property for general purposes. If a man is paying a rent of £50 a year and spends £500 on improvements, a great deal of that will go to the Chancellor in the event of Death Duties becoming payable. It encourages him to add to the capital value of the property. That is entirely different from opening the door to other things. I should have thought that one of the things which any Government would wish to do at the present time would be to encourage tenants to improve property, especially when there is a shortage of houses, so as to preserve the properties. I should have thought that it was quite impossible to say from anything we have heard up to now that that would be opening the door to asking for other concessions.
In the circumstances, and particularly in the circumstances of the argument put forward, I ask whether it might be possible to look into this from the point of view of the capital appreciation of the whole of the house property of this country. By "appreciation" I mean in the widest interest of the nation as a whole. Ought


we not to try to encourage a tenant to effect improvements by giving him advantages as we do in the case of a longer lease? If that were not done for a tenant for a short lease, I suggest that the 50 years should be brought down to some very much more appropriate figure, such as 14 or 21. That in itself would be a tremendous encouragement, and I believe it would go some way towards meeting what the noble Lord proposed. Obviously, the 50 year figure is far too high. Surely, there is the need for this reform at the present time. The Government Front Bench are laying themselves open to being twitted about their attitude towards their landlord. The Chancellor of the Exchequer ought not to lay himself open to that sort of twitting, but should look after the interests of the whole community as if he were, as he might have been, a good, sound Tory Chancellor.

Sir H. Lucas-Tooth: The point which my noble Friend has raised is one on which we must press the Government because there is an extraordinary anomaly. I think I understood the force of the argument put by the Solicitor-General. He said that we must not do anything that would open the door to allowing private individuals to claim Income Tax rebates in respect of expenditure which is properly their own personal expenditure. It may well be that the wording of the Clause raises that objection. On the other hand, if that is so, the wording can be altered, and I do not think the Government would have any difficulty in altering it so as to cover the anomaly raised.
9.45 p.m.
This is the anomaly. Suppose one takes a property which is valued at £100 a year for Income Tax purposes under Schedule A. Suppose that in one year the sum of £50 is spent in doing repairs to that property. It would be right and reasonable to say that that £50 should be deducted from the amount of the Schedule A tax for the purpose of assessing the liability on that house. Indeed, that may, be so, but one has to ask this further question: who, in fact, is carrying out that repair? If it is carried out in certain circumstances by the tenant, no rebate is allowed. If, on the other hand, it is carried out in other circumstances by the tenant, a rebate is allowed.

If it is carried out by the landlord, in every case rebate is allowed. Surely, that displays an anomaly, and a really absurd one? Supposing there are 30 years left to run on a lease, one has to ask a further question: was this lease originally for 49 years or was it for 51 years? If it was 51 years, then the tenant can recover; if it was only 49 years, he cannot recover. It is an impossible position. Supposing there is an obligation on the tenant to repair, but supposing the tenant goes to his landlord and says, "If I carry out these repairs I shall get no rebate in respect of Income Tax, but if you carry out these repairs, you will get a full rebate. Although I agree you have no obligation to do so, if you carry out these repairs you will then recover the full amount of rebate, and I am quite willing to go halves with you and we will split the difference which we shall get from the Revenue." I think that would be a perfectly legal agreement, and I do not think there is anything conspiratorial about it.

Mr. Ungoed-Thomas: Mr. Ungoed-Thomas (Llandaff and Barry) indicated dissent.

Sir H. Lucas-Tooth: I see the hon. Member for Llandaff and Barry (Mr. Ungoed-Thomas) shaking his head, and maybe he will intervene in the Debate. At any rate we have this ludicrous position, that what one man does will not give any rebate, what another does will give a rebate, and there seems to me to be plenty of ground there for conspiratorial agreements to get what can be got, and what should properly be got, out of the Bill. I urge the Government to reconsider this matter and to indicate that they are prepared to do something at a later stage of this Bill.

Viscount Hinchingbrooke: I have derived singularly little satisfaction from the statement of the Solicitor-General. When he talks about opening the door to tenants to put in family and personal expenses. I find it difficult to follow him. All I am seeking to do in this Clause is to apply the procedure of the maintenance claim set out in Schedule A, Rule 5, No. 8, which gives a landlord the right to put in a claim for maintenance, repairs, insurance and management. If you give the tenants the same right, they cannot go beyond it. How can they come along and put in a claim for all sorts of outside


expenses in connection with their houses? They are tied to the provision of the 1918 Act. I ask the Government to look at this again. There are inroads into the law already. There is the provision for the long lease and that provides the justification, in part, for shortening it. Why is it right to do in 50 years what it is wrong to do in 49 years? Then I ask the Government, as the Income Tax Act, 1945, was mentioned, to look at Section 33 which says:
…the owner or tenant of any agricultural or forestry land who incurs any capital expenditure on the construction of farm houses, farm or forestry buildings…shall be entitled to an allowance for that year of assessment and each of the succeeding nine years of assessment equal to one-tenth of that expenditure.

That gives tenants of agricultural land exactly the same right as landlords to recover the capital costs of their buildings. Is it not very close to that to give tenants of houses the same right to apply for a maintenance relief in respect of the repairs to their property? I do not see that the two things are far apart at all, and I beg the Government to look at it again. However, in view of the stern looks upon their faces, and the fact that the Solicitor-General has been so unforthcoming this evening, I hope that my right hon. and hon. Friends will join me in the Division Lobby on this Clause.

Question put, "That the Clause be read a Second time."

The Committee divided: Ayes, 101; Noes, 259.

Division No. 257.]
AYES
9.51 p.m.


Amory, D. Heathcoat
Hare, Hon J H. (Woodbridge)
Rayner, Brig. R.


Assheton, Rt. Hon. R
Harvey, Air-Comdre, A. V
Reed, Sir S. (Aylesbury)


Baldwin, A. E.
Hinchingbrooke, Viscount
Roberts, Emrys (Merioneth)


Barlow, Sir J
Hollis, M. C
Roberts, W (Cumberland, N.)


Baxter, A. B.
Holmes, Sir J. Stanley (Harwich)
Robinson, Wing-Comdr Roland


Beechman, N. A
Hope, Lord J.
Ropner, Col. L


Bennett, Sir P.
Howard, Hon. A.
Ross, Sir R. D. (Londonderry)


Birch, Nigel
Hutchison, Lt.-Com. Clark (E'b'gh, W.)
Sanderson, Sir F.


Bower, N.
Hutchison, Col, J. R. (Glasgow, C.)
Shepherd, W. S. (Bucklow)


Braithwaite Lt.-Comdr. J. G.
Jeffreys, General Sir G.
Stanley, Rt. Hon. O.


Bromley-Davenport, Lt.-Col W
Joynson-Hicks, Hon. L W
Stoddart-Scott, Col. M.


Buchan-Hepburn, P. G T
Langford-Holt, J.
Stuart, Rt. Hon. J (Moray)


Bullock, Capt. M
Lindsay, M. (Solihull)
Sutcliffe, H


Byers, Frank
Lipson, D. L.
Taylor, C. S. (Eastbourne)


Carson, E
Low, Brig. A. R. W
Taylor, Vice-Adm. E. A. (P'dd't'n, S.)


Clarke, Col. R. S.
Lucas-Tooth, Sir H.
Thorneycroft, G. E P. (Monmouth)


Clifton-Brown, Lt.-Col. G.
Macdonald, Sir P. (I. of Wight)
Thornton-Kemsley, C. N.


Corbett, Lieut.-Col. U (Ludlow)
Mackeson, Brig H. R
Thorp, Lt.-Col. R. A. F


Crookshank, Capt. Rt. Hon. H. F. C.
Maclay, Hon. J. S
Touche, G. C.


Crosthwaite-Eyre, Col. O. E.
Maitland, Comdr. J. W.
Vane, W. M. F


Cuthbert, W. N.
Manningham-Buller, R. E
Wadsworth, G


Darling, Sir W. Y.
Marples, A. E.
Wakefield, Sir W. W


Digby, S. W.
Marshall, D. (Bodmin)
Walker-Smith, D.


Dower, Lt.-Col. A. V. G. (Penrith)
Mellor, Sir J.
Ward, Hon. G. R


Drayson, G. B.
Morrison, Maj. J. G. (Sallsbury)
Wheatley, Colonel M. J.


Drewe, C
Mott-Radclyffe, Maj. C E
White, Sir D. (Fareham)


Dugdale, Maj. Sir T. (Richmond)
Neven-Spence, Sir B
White, J. B (Canterbury)


Eccles, D. M.
Nicholson G.
Williams, C (Torquay)


Fletcher, W. (Bury)
Noble, Comdr. A. H. P
Williams, Gerald (Tonbridge)


Fraser, H. C P. (Stone)
Peake, Rt. Hon. O
Willoughby de Eresby, Lord


Fraser, Sir I (Lonsdale)
Peto, Brig. C. H. M.
Winterton, Rt. Hon. Earl


Gage, C.
Poole, O. B. S. (Oswestry)



Glyn, Sir R.
Prior-Palmer, Brig. O
TOLLERS FOR THE AYES:


Grimston R. V.
Raikes, H. V
Mr. Studholme and


Hannon. Sir P. (Moseley)
Ramsay, Maj. S
Major Conant




NOES.


Adams, Richard (Balham)
Battley, J. R.
Brook, D. (Halifax)


Adams W. T. (Hammersmith, South)
Bechervaise, A. S
Brooks, T J (Rothwell)


Allen, A. C (Bosworth)
Benson, G.
Brown, George (Belper)


Alpass, J. H.
Berry, H
Brown, T J. (Ince)


Attewell, H. C.
Beswick, F.
Bruce, Maj. D. W. T


Austin, H. Lewis
Bing, G. H C
Burden, T. W


Awbery, S. S.
Binns, J.
Burke, W. A.


Ayles, W. H.
Blackburn, A. R
Butler, H. W. (Hackney, S.)


Ayrton Gould, Mrs B
Blenkinsop, A.
Callaghan, James


Bacon, Miss A.
Blyton, W R.
Champion, A J.


Baird, J.
Bottomley, A. G
Chater, D.


Balfour, A
Bowdon, Flg.-Offr. H. W.
Chetwynd, C. R


Barnes, Rt. Hon. A. J.
Bowles, F. G. (Nuneaton)
Cobb, F. A.


Barstow, P. G
Braddock, Mrs E M. (L'pl. Exch'ge)
Cocks, F. S


Barton, C.
Braddock, T (Mitcham)
Coldrick, W.




Collindridge, F.
Hutchinson, H. L. (Rusholme)
Pursey, Cmdr. H


Collins, V. J.
Hynd, J. B. (Attercliffe)
Randall, H. E


Colman, Miss G. M.
Irving, W. J.
Ranger, J


Comyns, Dr. L.
Janner, B.
Rankin, J


Cooper, Wing-Comdr. G.
Jeger, G. (Winchester)
Rees-Williams, D. R


Corbet, Mrs. F. K. (Camb'well, N. W.)
Jeger, Dr S. W (St. Pancras, S.E.)
Reeves, J.


Corlett, Dr. J.
Jones, Rt. Hon. A. C. (Shipley)
Reid, T. (Swindon)


Corvedale, Viscount
Jones, D T (Hartlepools)
Richards, R.


Crawley, A.
Jones, Elwyn (Plaistow)
Robens, A.


Crossman, R H. S
Jones, P. Asterley (Hitchin)
Roberts, Goronwy (Caernarvonshire)


Daggar, G.
Keenan, W.
Royle, C.


Daines, P.
Kenyon, C.
Sargood, R.


Dalton, Rt. Hon. H.
Key, C. W
Scollan, T


Davies, Edward (Burslem)
Kinley, J.
Shackleton, E. A. A


Davies, Ernest (Enfield)
Kirby, B. V
Sharp, Granville


Davies, Harold (Leek)
Lang, G.
Shawcross, C. N. (Widnes)


Davies, Haydn (St. Pancras, S.W.)
Lee, F. (Hulme)
Shawcross, Rt. Hon. Sir H. (St. Helens)


Davies, R. J. (Westhoughton)
Leslie, J. R.
Skeffington, A. M.


Deer, G
Levy, B. W
Skinnard, F. W.


Diamond, J
Lewis, A, W. J. (Upton)
Smith, C. (Colchester)


Dobbie, W.
Lewis, J. (Bolton)
Smith, H. N. (Nottingham, S.)


Dodds, N. N
Lipten, Lt.-Col. M
Solley, L. J.


Donovan, T
Longden, F
Sorenson, R W.


Driberg, T. E. N.
Lyne, A W
Soskice, Maj. Sir F


Dugdale, J. (W. Bromwich)
McAdam, W
Sparks, J. A


Dumpleton, C. W.
McEntee, V La
Stamford, W


Dye, S
McGhee, H. G
Steele, T.


Ede, Rt. Hon. J. C
Mack, J. D.
Stewart, Michael (Fulham, E)


Edelman, M.
McKay, J. (Wallsend)
Strachey, J.


Edwards, N. (Caerphilly)
Mackay, R W G (Hull, N.W.)
Swingler, S.


Evans, E. (Lowestoft)
McLeavy, F
Sylvester, G O


Evans, John (Ogmore)
Macpherson, T. (Romford)
Symonds, A. L.


Evans, S. N (Wednesbury)
Mallalieu, J. P W
Taylor, H B. (Mansfield)


Ewart, R.
Manning, Mrs. L. (Epping)
Taylor, R. J. (Morpeth)


Fairhurst, F.
Marshall, F. (Brightside)
Taylor, Dr. S. (Barnet)


Farthing, W. S
Mathers, G
Thomas, D. E. (Aberdare)


Fernyhough, E.
Messer, F
Thomas, Ivor (Keighley)


Fletcher, E. G. M. (Islington, E.)
Middleton, Mrs. L
Thomas, I. O. (Wrekin)


Follick, M.
Mikardo, Ian
Thomas, George (Cardiff)


Foot, M. M.
Mitchison, G R
Thorneycroft, Harry (Clayton)


Forman, J. C.
Monslow, W.
Thurlle, Ernest


Fraser, T. (Hamilton)
Moody, A. S
Tolley, L


Gaitskell, H. T. N
Morley, R.
Tomlinson, Rt. Hon. G


Ganley, Mrs. G. S
Morris, P. (Swansea, W.)
Turner-Samuels, M.


Gibbins, J.
Mort, D. L
Ungoed-Thomas, L.


Glanville, J. E. (Consett)
Moyle, A.
Vernon, Maj. W. F


Goodrich, H E.
Murray, J. D
Viant, S. P


Greenwood, A W J (Heywood)
Naylor, T. E.
Walkden, E.


Grenfell, D. R
Neal, H. (Claycross)
Wallace, G. D. (Chislehurst)


Grey, C. F.
Nichol, Mrs. M. E. (Bradford, N.)
Wallace, H W. (Walthamstow, E.)


Grierson, E
Nicholls, H. R. (Stratford)
Warbey, W. N.


Griffiths, D. (Rother Valley)
Noel-Baker, Capt. F. E. (Brentford)
Weitzman, D.


Griffiths, Rt. Hon. J. (Llanelly)
Noel-Buxton, Lady
Wells, W. T (Walsall)


Gunter, R. J.
Oliver, G. H
West, D. G.


Guy, W. H.
Paget, R. T.
White, H. (Derbyshire, N. E.


Haire, John E. (Wycombe)
Paling, Rt. Hon. Wilfred (Wentworth)
Whiteley, Rt. Hon. W


Hale, Leslie
Paling, Will T. (Dewsbury)
Wigg, Col. G. E


Hall, W. G.
Palmer, A. M. F
Wilkins, W. A.


Hamilton, Lieut.-Col. R
Pargiter, G. A
Willey, F. T (Sunderland)


Hannan, W (Maryhill)
Parker, J.
Williams, D. J. (Neath)


Hardy, E A
Parkin, B. T.
Williams, J. (Kelvingrove)


Hastings, Dr Somerville
Paton, J. (Norwich)
Williams, W. R. (Heston)


Henderson, A. (Kingswinford)
Pearson, A.
Willis, E


Henderson, Joseph (Ardwick)
Peart, Thomas F
Wills, Mrs. E. A


Herbison, Miss M
Piratin, P.
Woodburn, A.


Hobson, C. R.
Foole, Major Cecil (Lichfield
Woods, G. S


Holman, P.
Porter, E (Warrington)
Wyatt, W


Holmes, H E (Hemsworth)
Porter, G. (Leeds)
Yates, V. F.


House, G
Price, M. Philips
Young, Sir R. (Newton)


Hoy, J.
Pritt, D. N.
Zilliacus, K.


Hudson, J. H. (Eallne, W.)
Proctor, W. T



Hughes, Hector (Aberdeen, N.)
Pryde, D. J.
TELLERS FOK THE NOES:




Mr. Simmons and Mr. Snow.

NEW CLAUSE.—(Exemption from tax of efficiency grants and training allowances of Reserve Forces.)

The annual efficiency grant or training allowance to all ranks of the Royal Naval Reserve, the Royal Naval Volunteer Reserve, the Territorial Army and the Royal Air Force Volunteer Reserve shall not be regarded as income for any of the Income Tax Acts

during the current financial year.—[Lord John Hope.]

Brought up, and read the First time.

10.0 p.m.

Lord John Hope: I beg to move, "That the Clause be read a Second time."
I do not propose to detain the Committee for long or to go into very much detail which, if necessary, can be dealt with by my hon. Friends. The appeal here is essentially on psychological grounds. I do not think that hon. Members on any side of the Committee would deny the difficulty likely to be encountered in getting enough volunteers to man the Forces concerned, nor do I think there would be any dispute about the importance of these volunteer services. If the Government want to encourage volunteer service, it is not the best way to go about it to tax the bounty involved. These men will suffer a good deal of inconvenience and a good many disadvantages compared with those of their fellows who do not undertake voluntary service. All those things considered, I hope the Government will accept this suggestion in the spirit in which it is offered. If the Government would accept a suitable slogan to implement it, I suggest, "A parade a day keeps the doctor away."

Lieut.-Colonel Lipton: I gladly support this new Clause. It represents, perhaps in better words than I am able to use, the intention of the new Clause, "Territorial Army grants and allowances to be exempt from Income Tax," which I put on the Order Paper and which has not been called. At least, this indicates that there is a widespread measure of support in all quarters of the Committee for this proposal. I should like to give an idea of what is involved. In the first instance, rightly or wrongly, the efficiency grant is not paid to officers of the Territorial Army, so that whatever concession is granted in respect of that grant it must inevitably and exclusively be for the benefit of other ranks in the Territorial Army and the equivalent in the Navy and the Air Force. The expense allowance which is payable to all ranks amounts to the not very large sum of 1s. 6d. for a two-hour drill.
That, at the moment, is subject to tax under P.A.Y.E. It is hardly likely that every recruit to the Territorial Army or other branch of the Services will become entitled to the efficiency grant, because the £5 bounty is payable only on completion of 40 basic training periods and 15 days' camp, in the case of recruits, or 30 obligatory training periods and 15 days' camp, in the case of trained men.

There is a further efficiency grant of £3 annually which may be earned, in respect of voluntary training, by payment at the rate of 1s., subject to a maximum of 30s., for each voluntary training period performed over and above the requirements I have mentioned. There is, in addition, an efficiency payment of another 30s, which may be paid to each man who is certified by his commanding officer as efficient, that is to say, has completed the requirements laid down for trained men and is capable of filling his place in the unit's establishment.
The imposition of a tax on either the expenses allowance or the efficiency grant is a penalisation of those volunteers who do their best to make themselves efficient. In these circumstances, I hope that this request is not so far down the list of requests by suppliants for the Chancellor's largesse as to be too low in the queue. It is, in my view, quite indefensible that men giving up their spare time for national service should be out of pocket by it, and the equivalent of a drink in the canteen after a couple of hours in the drill hall is as reasonable as the refund of travelling expenses. This is the sort of pinprick which annoys people and serves no useful purpose. I am quite sure that the Chancellor, who is as anxious as anyone else to maintain and support the voluntary principle, will be kindly disposed towards this proposal, which is not put forward in a spirit of partisanship in any part of the Committee, and that he will give it favourable consideration.

General Sir George Jeffreys: I also wish to support the new Clause. The Clause, which includes all ranks of all auxiliary services, is similar to that put down by the hon. and gallant Member for Brixton (Lieut.-Colonel Lipton), to which I put my name. I support it as chairman of a Territorial Force Association, and, as such, I am very anxious that there should be every possible inducement, and no possible deterrent, to recruiting. I hope the Chancellor will note that this new Clause is supported by hon. Members on both sides of the Committee. I am certain hon. Members are united in one thing, namely, in their anxiety to do everything possible for the Territorial and Auxiliary Forces and to help and encourage the recruiting for these Forces It is almost unnecessary to


add that, certainly so far as hon. Members on this side of the Committee are concerned, and I am sure hon. Members opposite also, party questions do not enter into this matter in any way. I believe also that the War Office and other Service Departments are in favour of this concession, and would welcome any concession which the Chancellor might see fit to make in this regard.
When some weeks ago I asked some questions on this matter and inquired of the Chancellor if he realised that the charging of Income Tax on efficiency grants and training allowances would prove a deterrent to recruiting he appeared—although, possibly, I mistook his attitude—not to agree. I would like, therefore, to try to show what the position is. We are trying very hard indeed to get recruits for the Territorial Army, and recruiting is proceeding very slowly indeed. Under the new scheme, the Territorial Army has to be ready at the shortest notice. It is no longer a question of coming up for training on mobilisation. Therefore, the recruits who can be taken at this stage must be trained men who have already served their time and gained their experience, who will keep the Territorial Army going and who will form the cadre until the annual intake of Reservists under the universal service scheme begins. Many such men—although they have their loyalties, especially to their own units—are apt to feel, not unnaturally, that they have done their bit, and are apt to ask themselves why they should do any more and volunteer for further service. To attract them, these efficiency grants and training allowances are offered. They are not very handsome, but they are appreciable if they are received intact by those for whom they are intended. When those men are told that these efficiency grants and training allowances are subject to Income Tax—in other words, that the Government are giving with one hand and taking away with the other—they are apt to say, "We do not think it is good enough."
I am certain the Chancellor desires recruiting to be successful, and that he wishes well to the Territorial Army and the voluntary system, and I hope from that point of view that he will look favourably on this new Clause. But when he considers it, as no doubt he must, from the point of view of the Revenue,

I hope he will realise that the loss of revenue due to making this concession would be very small, even if the Territorial and Auxiliary Forces were to be fully recruited, as we hope they will be. It will not be a large sum. Reference has been made to the sum of is. 6d. an hour. That, as regards the training allowance, is not a very large sum. If, on the other hand, as I fear may be the case, the charge of Income Tax on these allowances and grants is insisted upon, recruiting may not merely hang fire as it is doing now, but it may practically cease. There will be little or nothing in the way of grants or allowances to tax. If, on the other hand, the Territorial Army is fully recruited, or fairly fully recruited, the income even then will be a tiny little item in the national Budget of income. I hope, therefore, that, from the point of view of revenue, the Chancellor of the Exchequer may think that this is not worth while and- may make the concession accordingly.
10.15 p.m.
There is one further point, the point of annoyance; and it is a big point. If we ask people to volunteer for service, and ask them to undertake certain duties, and if we say we shall give them certain allowances for doing so and certain efficiency grants, and if then they find that they are being made to give particulars of their incomes, to see how these grants will affect their incomes, it will cause great annoyance. One man who already has a large income—at any rate, a larger income than another—will have to pay full tax, a comparatively high tax; another man, who has a small income, will have to pay nothing. It will all mean a good deal of accounting, and many men will be paying different amounts.
When I questioned the Chancellor of the Exchequer also as to how and by whom this Income Tax would be collected, his answer was, by the Army; and, presumably, it will be the same in the case of the Navy and the Auxiliary Air Force. That would be all right in the case of a Regular unit with a full staff, but a Territorial unit has only a small permanent staff. In some cases there are not more than two on the permanent staff, who have all kinds of other duties, the care of equipment and arms, and so forth, to carry out. It is perfectly certain that, in cases where drills are going


on at different drill halls, possibly separated by a considerable number of miles, this collection, or accounting, at any rate, will fall upon the Territorial officers, and it may fall upon them after they have done duty at the drills, and that after a long day's civil work. They will have to mark up particulars of Income Tax by men attending the drills. I think it will be agreed that this will be for them a very uncongenial duty. For the others, after they have performed their drills, to state and give particulars about their Income Tax, to give their code numbers, and one thing and another, may be found even more uncongenial still.
I think it is perfectly certain that this process will be very unpopular with all ranks of the Territorial and Auxiliary Forces. I hope very much, therefore, that the Chancellor may see his way to forego what I am certain must be a very small income, derived after a not inconsiderable amount of trouble and a certain amount of irritation and annoyance. I hope very much he will grant this concession, which, I am certain, will prove of the utmost value to the recruiting campaign.

Mr. Driberg: I am very glad to be able to say a few words in support of this new Clause. Personally I cannot understand why Income Tax was levied upon this training allowance at all—this very modest training allowance, which is an allowance, as we have heard from my hon. Friends, intended to meet the modest out-of-pocket expenses of Territorials and others when they are at evening training away from their homes. The Board of Inland Revenue itself gives exemption—I think I have got the definition right—to expenses "which are incurred over and above those which a person would normally incur had he not been required to travel—i.e. the extra cost of living away from home." Surely that applies to meals taken at or near a drill hall miles from a man's own home? The definition applies to expenses arising in the course of employment. Surely, a fortiori, it should apply to expenses arising in the course of duty—duty undertaken not for the pleasure or the profit of the people concerned, but in the national interest?
There is one comparison which I hope will slightly impress my right hon. Friend.

It seems to me to be a fairly close parallel. He will correct me if I am wrong, but I believe that the subsistence allowance given to members of the Forces when travelling is exempt from tax. Surely that is a pretty close parallel? I am not sure that the case for the bounty is quite so strong as the case for the training allowance, since it is an annually recurring payment. None the less, apart from that, it seems to me that it is essentially comparable with, for instance, the bounty paid to soldiers re-engaging in the Regular Army, which is tax-free. Also, war gratuities are tax free. Perhaps this is a closer parallel: I gather that an undertaking has been given to the Royal Observer Corps that any emoluments up to £20 can be disregarded. I hope that my right hon. Friend will be able to meet hon. Members on both sides of the Committee who are pressing him about this matter, both on the training allowance and also, if possible, on the bounty.
The hon. and gallant Member for Petersfield (Sir G. Jeffreys) very rightly emphasised the amount of extra paper work which will have to be done, at unit level, for a very small return indeed. That, I suggest, will greatly inconvenience not only the territorial units and others concerned, on that side of it, but also the Inland Revenue people, who will be called upon to do a great deal of complicated extra work, in the way of notifying liability and collecting the tax, for a very small return. Finally I entirely agree with those hon. Members who have said that, although this may be a minor irritant, none the less it is proving, in certain cases, as I have seen in my own county, a definite deterrent to men willing to volunteer for Territorial service.

Mr. Dalton: We have had a very interesting series of speeches, and this, as has been truly said, is not a party matter. We all desire that the Territorial Army shall flourish, together with the other bodies mentioned in the new Clause which we are now discussing. The question is how far I can go in meeting the claims that have been put forward, without certain inconveniences, which I will state frankly to the Committee. I am anxious to go as far as I can. There are several separate points here. There was an earlier proposed new Clause on the Order Paper, which was not moved, but which is also relevant—(Territorial Army grants and allowances


to be exempt from Income Tax). In the new Clause which we are discussing, special reference is made to the annual efficiency grant and to the training allowances of the various Armed Forces. The annual efficiency grant, as its name implies, is an annual grant, and I tell the Committee frankly that here is my chief difficulty in going all the way to meet the arguments put forward. Being an annual grant it is, by its nature, subject to Income Tax. It is an annual payment, forming part of the annual incomings, each year, of the person concerned. I will come back to that in a moment. This annual aspect does present to me certain difficulties in accepting the proposal under that head.
On the other hand, the training expenses allowance does stand, as it seems to me, very near to a subsistence allowance, and a subsistence allowance we can, quite properly, in accord with our practice in other Income Tax fields, exempt from Income Tax liability. It has been truly said by my hon. Friend the Member for Maldon (Mr. Driberg) that travelling expenses are already exempt from Income Tax, quite properly; and I think I can see my way to bring the training expenses allowance for the Territorial Army and these other Armed Forces into line with the travelling expenses and subsistence allowances. I will be prepared, and gladly, to put down on Report a proposal to exempt the training expenses allowance.
On the other hand I want to speak frankly about my difficulty over the annual bonus or efficiency pay—it is said, with great persuasiveness, that we desire to stimulate recruitment. Of course we do, but we have resisted—and I think I have found support from all quarters on this—proposals that Income Tax should be used as an instrument for creating the greater attractiveness of one occupation as against another. Discussions have taken place about the under-manned industries, and proposals have sometimes been made to me, which I have had to reject, that we should give remission of Income Tax on what is admittedly income. If we were to say, as we would be compelled to say, that this is income, judged by ordinary standards, and is thereby subject to tax, but since we desire to encourage the Territorials and other bodies, we will treat it for this purpose as though it were not income to make more attractive entry into

these Forces, then I should be led along a slippery slope which I have hitherto refused to tread.

Commander Noble: I wonder whether the Chancellor of the Exchequer would care to say how the recruiting for these voluntary Forces has been going?

Mr. Dalton: That question should obviously be addressed to the Service Ministers. We all desire that recruiting shall go well, but that does not affect the logical argument I was trying to put to the Committee.

Lord John Hope: Surely, it is not tall to compare voluntary service in these Forces with industry? This is something these men are doing in their spare time, and it does not clash with industry at all.

Mr. Dalton: I am seeking to put this matter in a perfectly friendly fashion, and I am not trying to score points in any way. In a sense, all these other forms of work are voluntary. For instance, sometimes I am asked why we cannot exempt overtime earnings in certain sections of industry. We had all that out last year, and I think the Committee were satisfied that it would be completely impracticable to do that administratively. There is a certain analogy there, although I do not want to press it too far. We have there something which is admittedly within the terms of the general conception of taxable income. I do not think there can be any point of difference, apart from the argument of making entry into the Territorial Army more attractive, on the question that these annual payments are taxable income. If it were not the Territorial Army we were considering, but some occupation about which we were not particularly interested, where work could be done in spare time and on a voluntary basis, which paid a bounty, no one would desire that taxable income ought not to he returned for Income Tax purposes
The only argument we are considering now is whether this is desirable to encourage entry into the Forces. I have had to resist the argument for using Income Tax as an inducement to get people to do one thing rather than another on the grounds that the former would be in the national interest. That is my difficulty. Although I am prepared to meet the case in regard to training allowances, T do not feel able to meet the case in


regard to annual bonuses. I hope this will meet the wishes of hon. Members, because I started with the desire to meet them on this new Clause as far as I could; but reflecting on the queries which would follow if I accepted the principle that a thing ought not to be taxed merely because of a desire to encourage something, I fear I am not able to accept it.
10.30 p.m.
I have studied carefully what the hon. and gallant Member for Petersfield (Sir G. Jeffreys) said, and I think one should look into the aspects of administration. I can reassure the hon. and gallant Gentleman with regard to the modes of payment and the question of the work which would be thrown on to Territorial Army pay offices. I am able to say that we can arrange that there will be no deduction at all at the Territorial Army level of any Income Tax from any of these payments. We will undertake to reduce the amount of work to be thrown on to the pay officers and other officers of the Territorial Army. These emoluments will be paid in full without any deductions at all, and in so far as any adjustment is required, in the Income Tax liability of the person concerned, it will be adjusted in the P.A.Y.E., without any deduction needing to be made at the pay office. I hope that, administratively, that will be helpful. Psychologically, I hope also it will go some little distance to meet the case which has been put to me so persuasively tonight. I am prepared to ease the administrative burden. I will go along the road as far as the training allowances are concerned, and I will put down a new Clause to give effect to that, but I cannot agree that the bounty shall not be chargeable.

Earl Winterton: I would like to say a word on this matter. I apologise if I stand between my hon. Friends and the Committee, but I would like to speak because of long associations with the Territorial Army and with Territorial Associations, and because I would also try to persuade the Chancellor to accept this Clause. Having heard what the Chancellor has said, I would express my thanks to him for what he has accepted. I would also like to thank my hon. and gallant Friend, the Member for Petersfield (Sir G. Jeffreys) who put the case so succinctly

and tactfully. I was sorry the Chancellor, in his closing words, should have shut his mind to the allowance for the bounty. I would like to ask something about the point he made on the possible effect there might be on other concessions he would be asked to make. He used the argument, I think, that he did not want, by means of remissions of taxation, to make one occupation appear more beneficial than another. My first argument on that point would be that this is not an occupation. Surely it must be realised that this is not an occupation at all. It really is a point of terrific difference. I cannot say much because one would get out of Order; I sympathise with the Chancellor's point of view but to make one occupation appear more favourable than another is what has been done by the Government by other means in the case of the miners. It is being done in other fields, apart from pure finance, by certain actions which have been taken. My main answer is that this is not an occupation.
The second point is—and here I am sure my gallant Friends behind me, all of whom have had experience of Territorials will agree—that recruiting is a very special thing. Many Regular soldiers, whether members of this House or not, have not the least idea of what constitutes the essence of Territorial recruiting. I will say what I believe to be the essence of it. It is something or other you offer to the Territorials, either by way of appeals to their patriotism, or by some financial inducement and compensatory advantages for having to give up, in many cases, their annual holidays and in some cases of unpatriotic employers, their pay as well. In other words, you have to find some compensatory grant. We must not get on to a Territorial Debate on this new Clause, but it is notorious, as has been pointed out in this Debate, that we are not getting the men for the volunteer Army. We want, therefore, to do something striking. I want to use exactly the opposite argument to that used by the right hon. Gentleman in the first part of his speech and say, "Do something striking; give a discrimination and preference." While this may be difficult by the ordinary processes that we are bound to adopt in connection with Income Tax Law, here is a special case for a concession because it is so important to get these men.
In my opinion—and I think of my hon. Friends behind me, and hon. Gentlemen below the Gangway opposite, who have had long experience of the Territorials—it will be infinitely harder to get Territorials under the conditions of the present Act than it was in the old days, for this psychological reason. In the old days, Territorials served with other volunteers. They regarded themselves, to use a legal phrase, sui generis—with pride that they were something different, that they were Territorials and volunteers. Now, they are to be lumped together with the conscript soldiers. Therefore, I really would ask the right hon. Gentleman to give further consideration to this matter. I hope he will not finally close his mind to it between now and the Report stage because, believe me, if he could make the concession suggested in this very admirable new Clause it would have a very beneficial effect on the Territorials.

Mr. Rees-Williams: I was disappointed that the Chancellor of the Exchequer could not see his way clear to make this allowance in respect of the bounty, but I appreciate his reason that it would have caused difficulties in other ways and I will not press him on those grounds. His sympathy, I know, is fully with the Territorial Army, and if he possibly could make an allowance I am sure he would. I speak with some feeling on this matter because I am a member of the Territorial Army and have been for many years. It is true that the War Office have put me on the unemployed list and it is not likely that I will again qualify for a bounty, but it may be that I shall do so if I am called upon to serve again, when I shall be ready if the need arises. The subsistence allowance is a different matter. The position is that in the old days—I was for some years a company commander and later a battery commander in the Territorial Army—we had sometimes considerable difficulty in recruiting men. If this little allowance is not made tax free tonight I believe it will have a serious effect indeed upon recruiting.
I agree with the noble Lord in that I do not think the War Office understand the Territorial Army, and I do not believe the Regulars do, either. May I show the background against which the Territorial Army worked. My own battery in South Wales was mainly composed of miners, tin plate workers and steel

workers, the best troops in the world. What used to happen was that these men came up from the pits and out of the steel works, washed, put on uniforms and went to the drill hall. They would have felt rather bitter if their allowance, out of which they could buy a pint of beer, was taxed. That is a very different thing from the annual bounty which is paid in camp presumably at the end of the year.

Air-Commodore Harvey: On a point of order. The hon. Member keeps referring to the Territorial Army. Surely this new Clause applies not only to the Territorial Army, but to the Auxiliary Air Force and the Naval Reserve. Why does the hon. Member confine himself to the Territorial Army?

Mr. Rees-Williams: I am confining myself to the Territorial Army, because it is the service about which I know something. If the hon. and gallant Member has knowledge of the other auxiliary forces, he can enlighten us on the special conditions which apply in them. I can only speak of the Territorial Army. I do not believe that the Chancellor's failure to meet the hon. Member for Midlothian and Peebles (Lord John Hope) who moved this new Clause will have any effect on Territorial recruiting. Before the war, the bounty was taxed. May I say again, as one who is interested in the Territorial Army, and served in it from the rank of private to Lieut.-Colonel, that I am rather surprised at the great interest taken by hon. Members on the other side of the Committee in the Territorial Army tonight. We were crying out before the war, for many years, for interest to be taken in the Territorial Army by the party opposite.

Earl Winterton: May I point out that in the 1914 War the number of Tory Members of Parliament who served as officers in the Territorial Army in that war, was, I think, 50, compared with 10 in the Liberal Party. In view of that, and the devoted service of many on this side of the Committee, I hope the hon. Member will withdraw those offensive remarks.

Mr. Rees-Williams: I did not include the noble Lord in my comments. I was talking about the attitude of the Tory political party between the two world wars. Hon. Members must know that it was the Tory political party which in 1933—

The Deputy-Chairman: The hon. Member is completely out of Order. On the matter which is before the Committee we cannot have a Debate on the attitude of the Tory Party to the Territorials in 1933.

Mr. Rees-Williams: I was just going to point out that in that year they sent the Territorial Army to camp without any pay.

The Deputy-Chairman: Even then, the hon. Member is not dealing with the new Clause which is under discussion.

Mr. Rees-Williams: The opposition has said that the tax on the bounty will affect recruiting. I am only pointing out that they sent the Territorial Army to camp without any pay, and that did not necessarily affect recruiting. That was the Conservative policy of 1933. I think the Chancellor of the Exchequer is to be praised for making the concession which he has made. Furthermore, it must he remembered that the bounty was taxable before the war. Why did not a Conservative Chancellor of the Exchequer before the war allow the bounty to be tax free? I think we have every reason tonight to thank the Chancellor for this concession to the Territorial Army.

Sir Ralph Glyn: It is unfortunate that such remarks should have been made in this Debate, but I do not think that any hon. Member wishes to deal with anything but the new Clause. I think, too, that many of us appreciate the difficulty in which the Chancellor finds himself through the fact that this is an annual payment. But nowadays, efficiency in all the Services is of a high order in view of the large number of new weapons which a man must master.
I only rise to ask the right hon. Gentleman whether, if a change were devised in a way in which efficiency would be assessed to suit all three services, whereby it would not be an annual grant but an ad hoc grant, it would solve this difficulty. If the Services were able to work out a new system in which a man would receive a grant in accordance with his ability to handle weapons, would not the Chancellor of the Exchequer's difficulty be removed?

10.45 p.m.

Brigadier Low: I would like to expand the point put forward by the hon. Member for Abingdon (Sir R. Glyn). The Chancellor of the Exchequer has told the Committee that he is very anxious to do all he can to assist the volunteer forces, and I am not asking on behalf of the Territorial Army or any particular force. I believe it is true that under the short service scheme applicable, I believe, to any of the Services, the gratuity paid at the end of their service to members who take the engagement is exempted from tax. If that is so, and their engagement is spread over four or five years, why cannot the right hon. Gentleman treat this annual bounty, payable to men called up for a stated period—otherwise they suffer some penalty—in the same way? Take the example of a man who volunteers for the Territorial Army, taking a four-year engagement and remaining in the Territorial Army for four years. Suppose his bounty is £8 a year, could not the Chancellor of the Exchequer treat that as if it were a gratuity of £32 at the end of his four years. He would therefore equate it with the gratuity, which is exempt from tax, of the man who joins up for a short-term engagement of five years. If the Chancellor of the Exchequer is really anxious, and I am sure that he is, to do all he can for these volunteer forces, why does he not treat the bounty in that way?
If he is unwilling to go as far as I suggest, will he consult with his right hon. Friends who have not done the Committee the honour of being here tonight. There may be some good reason why they are not here, but this is a matter in which we on this side are very interested. Hon. Members behind the right hon. Gentleman are also very interested, and it would have been of value to the Committee to have his right hon. Friends here tonight. If he will not go as far as I have suggested, will he consult with his right hon. Friends so that those who join these volunteer Forces are given gratuities at the end of the period of their engagement, and are granted those gratuities exempt from tax in the same way as those entering short-service engagements are given tax-free gratuities at the end of their service? Perhaps the Chancellor of the Exchequer has not thought about this before and would like longer to think about it. I suggest that he should tell


the Committee that he will think about it and come to the House with a suggestion on the Report stage.

Mr. Dalton: I am quite prepared to think about it, having listened to the last two speakers who have made a helpful suggestion, although I am still not quite sure that it gets us over the hump. I will be perfectly frank with the Committee. My difficulty is to exempt annual payments of income. Supposing we could transform the payment so that it no longer had an annual character, then it would make it easier. On the other hand, I do not think the other ranks would want to wait for four years before they touched the bounty.

Lieut.-Colonel Lipton: Officers do not get bounties.

Mr. Dalton: In some formations they do, but we are now covering wider ground. I will look at it again. I am anxious to be conciliatory, but I must also be on guard against compromising a certain position—I do not want to call it a principle. It is a position. We have to be careful with regard to any action as a result of which we might be run off our feet with other Clauses which would be quite as plausible. I will do my best to exercise my ingenuity, but whether it will be equal to this rather difficult task I do not know. Perhaps the Committee will take on account the offer which I have made with regard to training allowances and the administrative simplification I have suggested. I will have a look at the other matter, but I do ask the Committee not to feel disappointed or think I have failed in active consideration if in the end I find it impossible. I have already given some study to the question and have done my best, and perhaps the Committee would leave it at that?

Lieut.-Commander Braithwaite: I only want to ask the right hon. Gentleman one question arising out of his first speech. May I say how much I welcome both speeches he has made? I think my noble friend will feel well satisfied with the reception which has been given to this new Clause. In his first speech the Chancellor of the Exchequer indicated that, whatever else might happen, there would be no deduction from the bounty when it was paid through the Naval, Military or Air Force channels, and that it would be paid in full without In-

come Tax deduction. I did not quite follow what was going to happen next—whether it was going to get caught up in the whirlpool of P.A.Y.E. and be deducted through the man's firm. In that case it might not be noticed but would be absorbed in his civilian life. Or will some demand be received by the serving man later from the Inland Revenue? If so, it would not have the soothing effect which the Chancellor suggested. It may be that in this financial year, with the raising of the earned income allowance, it might well disappear in the whirlpool of P.A.Y.E. I merely want to know what will happen.

Mr. Dalton: It will be adjusted through the personal allowance. It will not come any more within the purview of the Territorial Army or other formations. The hon. and gallant Gentleman has repeated a point I made, which is that the gradual extension of Income Tax reliefs will mean that in many cases there will be no liability whatever.

Air-Commodore Harvey: I think the Chancellor of the Exchequer has gone a considerable way to satisfy our wishes in this matter. I want to point out that the Air Force is concerned quite as much as the other two services. There is only one point I would like to make. If the Chancellor of the Exchequer would wait until the four years are served, he will have the use of the money for four years; and I am sure it will help to get extra men into the Service. I beg the Chancellor, where a gratuity for a short-service commission is concerned, to pay the — after the four years voluntary service, and everyone will be happy.

Lord John Hope: The Chancellor has expressed certain doubts, but I am sure we will be able to overcome these difficulties. In view of the most helpful attitude he has adopted towards this Clause, I beg to ask leave to withdraw the Motion.

Motion and Clause, by leave, withdrawn.

NEW CLAUSE.—(Deduction for subscription to recognised society in certain cases.)

If the holder of an office or employment of profit assessed under Schedule E of the Income Tax Act, 1918, is necessarily obliged to incur and defray out of the emoluments thereof amounts by way of subscription to a recognised


society or institution existing for the advancement of learning, science or technology, there may be deducted from the emoluments to be assessed the amounts so necessarily incurred and defrayed.
Provided that the amounts deducted shall not exceed fifteen pounds in the aggregate in any one year.—[Mr. Palmer.]

Brought up, and read the First time.

Mr. Palmer: I beg to move, "That the Clause be read a Second time."
The subject of this Clause has been before the House on a number of occasions. I hope the Committee will now give the matter further and special consideration. The position at the moment is that a doctor, engineer or scientific man, businessman, industrialists or architect in private practice, is allowed a deduction for a subscription to a scientific body or learned society, as expenses under Schedule D. It is called expenses and is a charge against the business. But if he gives up private practice and accepts employment with a corporation or with a company, the subscription is not allowable because his Income Tax comes under Schedule E. In both cases, I suggest, the need for the man concerned to make a subscription is equally great. This discrimination between the man in private practice and an employee is neither fair nor equitable; nor is it in the interests of good public policy. It places the employee in an unenviable position. There is some danger in that, because at the present time the trend is to increase the number of employee engineers, scientists, etc., against those in private practice. For this reason the Clause seeks to remove the anomaly which exists between the position of a man in private practice and the employee.
11.0 p.m.
I hope that my right hon. Friend will not argue that the subscription is a condition of employment, and that the man concerned would he sacked if he did not continue to make the subscription. Generally speaking, an engineer, scientists or architect in employment does not make a subscription to a society because he fears the sack. He makes it because he is anxious to keep his professional and scientific knowledge up to date. In that sense I suggest that he is necessarily obliged to incur this expenditure. There is an additional reason for giving support to this Clause. It is a reason of general

public policy. It is of vital interest to the country and to the Government to encourage young scientific technical and professional men and women, to whom i5 as a subscription to a learned society, scientific body or institution is no peppercorn. Very often the man concerned has to make in any case some other subscription. There are subscriptions to various organisations, trade unions or similar bodies. I know of men and women who are anxious to increase their knowledge and experience by making subscriptions to other bodies, but they dare not do so because they simply cannot afford the subscriptions. This condition of affairs is not desirable at a time when it is important that the country should concentrate upon advancement in technology and scientific methods and efficiency. The cost to the Exchequer, I should imagine, would be comparatively slight.

Mr. Glenvil Hall: The object of this new Clause, as my hon. Friend has indicated, is to allow a deduction of ir5 under Rule 9, Schedule E, for any subscription to a recognised society. He does not indicate what a recognised society would be. That, of course, could later on be defined if my right hon. Friend saw his way to accept this proposal that allowances should be given up to £15 for any subscription to a recognised society for the advancement of learning and technology, if such an expenditure has been necessarily incurred or defrayed by the individual concerned. At present this expenditure can be allowed to any taxpayer who is fortunate enough — or unfortunate enough, whichever way you look at it—to be assessed under Schedule D but is not allowed under Schedule E.
The question of the admissibility under Rule 9 of subscriptions to professional societies has been the subject of a case in the High Court. A certain Dr. Tate brought an action against a gentleman named Mr. Simpson connected with the Inland Revenue, and the Judge definitely laid it down—and I quoted from part of his judgment this afternoon on another Clause—that an expenditure of this kind is not to be taken into account. Dr. Tate had a very good case for deducting, as an allowance, all kinds of subscriptions which he was paying, or wanted to pay, to the Royal Society of Medicine, the Society of Medical Officers of Health, the Royal Institute of Public


Health, and the Association of County Medical Officers of Health. The judge said:
I think it is desirable to lay down some principle. I think that all subscriptions to professional societies and taking in of professional literature and all that sort of expense, which enables a man to keep himself fit foe what he is doing, are things which can none of them be allowed.
That is how the law stands.
Supposing my right hon. Friend were to accede to this request, on the face of it a reasonable one. Here is a man engaged in a profession, and he naturally wants to keep himself abreast of all the latest thought in his profession. One way of doing it is to belong to societies catering for his profession, and taking in—by subscribing for—the literature of his craft. There is no reason on ordinary grounds why that should not be put down as necessary expense. But Income Tax has to be founded on broad principles, not on individual cases. We have had reason to realise that earlier this afternoon, when it was my misfortune to indicate that my right hon. Friend could not accept certain new Clauses, not because individual cases of hardship brought to his notice were not worthy of help, but because Income Tax law has to be anchored to certain principles.
Subscriptions of this kind do assist an individual to do his job better, but the principle is not that of the subscriptions, because you cannot hold it there. If you allowed subscriptions to count, you would have to see, as a general principle, that anything that helped a professional man or woman—or any man or womar—to do their job better should rank for Income Tax allowance. That would mean that a trade unionist would definitely claim that his trade union subscription came: within the same category. I could claim that these glasses, which I have had to buy, assist me to do my job better. Most assuredly they do, just as much as his medical journal helps a doctor in iris job The same applies to a man who has to have an artificial limb or some aid to hearing. All these, looked at from one sine—that is sentimentally—are entitled to rank as expenses, certainly as much as those of the individuals who had their case so well put by the hon. Member who moved this new Clause, in that they help a person to do his job better. I am sorry, therefore, that my right hon. Friend is not able

to accede to this new Clause for the reasons which I hope will commend themselves to all Members of the Committee.

Mr. Maclay: There is one thing I would like to ask the right hon. Gentleman about. He mentioned the case of a man who had an artificial limb. I would like to submit that that i- a very special case—

The Deputy-Chairman: flat cannot be regarded as coming within the new Clause under discussion.

Mr. Maclay: As the right hon. Gentleman used it, I thought that I might have been allowed to ask a question on the point.

The Deputy-Chairman: The right hon. Gentleman used it in passing as an illustration.

Mr. Braddock: I must say that every argument used from the Front Bench was in favour of the new Clause. My right hon. Friend admitted that people under Schedule D were allowed all these expenses. If it is good for the man in private practice to be allowed these subscriptions—these necessary subscriptions —surely the same argument applies to the man who is employed? Certain of these occupations are registered occupations, and, unless a man is registered and pays a subscription, he is prohibited from practising in his profession.

Mr. Glenvil Hall: That would count. Whether a man is assessed under Schedule D or Schedule E, if it is part of the terms of his employment; or if he makes his own living in his own way, it would he all right.

Mr. Braddock: It is agreed, so far: it a man is registered for his occupation or profession, he has to pay a subscription, and if he does not pay that subscription he is struck off the hooks, and can no longer practise. Let us go a little further. Many of these men, when applying for posts, according to the advertisements about them, must he members of such and such a professional or technical organisation. Therefore, it is just as much a necessity, in order to hold a job, to be registered in accordance with the requirements of that particular profession. That being the case, and in view of the admissions that have been made by my right hon. Friend, I do


ask him not to be adamant about this, but to consider the matter further to see if something can be done to meet the request at a later stage.

Question, "That the Clause be read a Second time," put and negatived.

NEW CLAUSE.—(Adjustment of value of bonus issues.)

Notwithstanding anything in Sections forty-eight, forty-nine and fifty where a company issues by way of bonus any securities to its members or debenture holders and that company has at any prior date reduced its issued capital or debentures by reason of losses of its property there shall be disregarded in calculating the value of the bonus the amount by which the securities were so reduced and which has not already been so disregarded on the occasion of a previous bonus issue.—(Mr. Birch.]

Brought up, and read the First time.

Mr. Birch: I beg to move, "That the Clause be read a Second time."
During the watches of the night last week my right hon. Friend the junior Member for the City of London (Mr. Assheton) urged upon the Chancellor of the Exchequer the importance of recognising the converse of the proposition which he was putting forward in regard to bonus shares—that if it was wrong that the capital of a company should be watered, equally it was wrong that it should be dehydrated. That was, in effect, what he was saying. He was urging that the nominal capital of a company should approximate to its real capital. The right hon. Gentleman the Chancellor of the Exchequer very wisely refused to answer that, because there was no answer, and equally wisely arranged that that discussion should take place in the small hours of the morning so that it could not be reported. The Chancellor has laid down, in general, that bonus shares are immoral, but can be allowed on payment of 10 per cent. If he maintains that, that to inflate capital by bonus shares must be immoral, he must hold that to reduce capital must be highly moral, because it would have the effect of increasing the nominal rate of dividend. Both those propositions are equally nonsense, as he knows, I have no doubt, himself. What we say is that the nominal capital of a company should be the true capital; that is to say, that it should represent the real assets employed in that particular business.
11.15 p.m.
Many companies in the past have had to write down their capital and I have no doubt in the future many will have to do so. It is impossible for the present inflation to go on for ever, but, even with it going on, very heavy losses will no doubt happen, because of shortages of raw materials and so on. In addition, changes in our economy are bound to cause certain companies at certain times to go down, just as they cause others to go up. But the whirligig of time does bring its revenges, and often a company which has gone through difficult times is restored to prosperity. What this new Clause seeks to do is this—if a company has had to write down its capital in a difficult period, if and when it is restored to prosperity and writes its capital back, it should not have to pay a 10 per cent. tax for so doing. It is obviously impossible in the case of such a company to argue that the real capital has never been there—it has been saved twice over.
Take the case of a company like Vickers —20 years ago it wrote down the ordinary shares to 6s. 8d. and then some time before the war wrote them up from 6s. 8d. to 10s., where they now remain. Of the capital which had originally been put in, a lot was lost after the last war, but in the 20 years since a conservative policy was followed and there is no doubt at all that the real assets employed in the business now are very much greater than the capital would be if written back to £1 for each ordinary share. This Bill lays down that where you have a company which has written down its capital, and the capital is first saved and then lost and then saved over again, it still has to pay a tax of 10 per cent. to put it back to a level which represents no more than the truth. We clearly recognise that what we are proposing is only a mitigation of the evil the Chancellor of the Exchequer has wrought and quite a small one, but it is a certain mitigation and goes some way towards justice. I therefore commend it to hon. Members.

Colonel Crosthwaite-Eyre: I support my hon. Friend the Member for Flint (Mr. Birch). He said the object of the Clause was to try to ensure that reasonable assets and nominal capital do as far as possible equate one with the other. That is the situa-


tion which is represented by one of the major pieces of legislation we are passing through the House this session—the Companies Bill. The most stringent provisions are being laid down to ensure that every balance sheet gives a true and fair picture of assets of the company. This Clause is designed to ensure that what we are doing under the Companies Bill so far as bonus shares are concerned is translated into fact. My hon. Friend the Member for Flint gave examples of companies whose assets have been written down, but he has not mentioned the most important one, which is the case of mining companies. We have the headquarters of most of the large mining companies of the world in this country; with the exception of a few in U.S.A. These companies are for the most part dependent on what we may call genuine speculation. Capital is produced as they may or may not succeed in the favourable exploitation of the mining sites selected.
It often comes to the point that the people running a mine have to decide whether their capital shall be increased or not, whether they will risk any further money, whether they will write down the capital they have in order to meet future prospects. There is no branch of industry which has brought more prosperity in the way of dividends from abroad, or which has done so much to help our progress, as the mining industry. I think it will be generally agreed that of all those things on which we have relied to balance our adverse trade, nothing has contributed so much as the mining industry.
In this Bill we are going to place a burden upon these big companies—a burden which will force their headquarters from this country. Let it be remembered that they can equally well operate from other parts of the globe. Unless we accept some such proposal as this to enable the company to get back what it has spent and to enable it to readjust its balance sheet, it is indeed a gloomy prospect. It is a gloomy prospect in hoping that we shall keep in this country this large source of invisible revenue. One could speak of the publishing trade. One has to risk the capital before one can hope to get anything back. In newspaper production, in which the whole of the capital is entirely spent on the development of the proposition, one has to hope that at the end one will see a profit and that the undertaking

will be a paying proposition. In a weekly or monthly magazine one has to take the capital and write it down in the hope that it will come back. The faith of the proprietors is justified very often, but as this Bill stands who can have that faith? If one has faith in one's enterprise and writes down one's capital, one has to pay in respect of real assets and nominal assets. I have mentioned two trades and they show the evils of this tax. I want to make it clear that it is no intention of ours to say that this Clause meets all the evils, but we hope it will remedy one of the major evils. We are very largely dependent on these industries which redound to the credit of our country, and we should give them faith and hope for the future.

Mr. Benson: We are not now discussing the desirability or otherwise of the bonus issue but directing our minds to the desirability or otherwise of the Clause on the Paper. The bonus tax is not a tax on the accumulation of assets. It is a tax upon a pure financial transaction and that transaction is the issue of bonus shares. I cannot see the slightest justification for the proposal that is involved in this Clause. I suppose that every company tends to starts its life with its paid-up capital approximately equal to its assets, and if a company, having lost its assets, of its own volition writes down its nominal capital to the value of its assets, it is merely reverting to the status quo. It is merely reverting to its original virginal purity where these assets and its paid-up capital are equal. Why should a company making that mere voluntary financial transaction enjoy a more favourable position if things go well than a company which has not had losses and which has not voluntarily written down its capital? It has merely gone back to its original position. My objection to this Clause is that it introduces an entirely illogical element into the bonus tax. The bonus tax is perfectly logical. Hon. Gentlemen may or may not like it, but in itself it is consistent. If the Chancellor of the Exchequer accepts this Clause, immediately he will introduce an element of inconsistency and, as a person of a very tidy mind, or at least one who prides himself on having a tidy mind on financial matters—

Mr. Stanley: Come over here.

Mr. Benson: The untidiness is on the opposite side. As a person who prides himself on having a tidy mind in financial matters, I strongly object to the introduction of illogicality and lack of consistency into any tax. It is perfectly true that the Chancellor of the Exchequer does, from time to time, give concessions which are themselves illogical and which destroy the logicality of a tax. If he does that it is for the purpose of furthering some public policy. But that is not involved here. No one can get sentimental about the bonus tax, and certainly there is nothing in public policy which would suggest that the issue of bonus shares should take place. I am not arguing whether they are good or bad, but there is nothing in public policy which suggests that the Chancellor of the Exchequer should facilitate them.
Hon. Gentlemen suggested that the penalisation of the issue of bonus shares imposed a burden. There is no compulsion to issue bonus shares. It may be desirable to issue bonus shares, or it may not. It is purely a voluntary action upon the part of the company that does so, and there is no burden imposed upon it if it does not. It does not put a company in any better position to trade or make it financially stronger to issue bonus shares. It is purely a book-keeping transaction. I am sorry to oppose this because I have noticed that hon. Gentlemen opposite during the whole of this Debate have been very generous in supporting any concession asked for from this side, even though they had the last 25 years to grant those concessions themselves. I would have liked to reciprocate, but, frankly, appealing once again to my tidy mind, I should resist any attempt to make a bonus tax illogical by this means.

11.30 p.m.

Colonel Ropner: This is by no means the first occasion during the last few weeks that we have been asked to consider a tax on bonus shares. I have sat, I think, through most of the Debates on this subject, but I have not heard a more illogical argument than that to which we have just listened. I must confess that I usually admire the hon. Member for Chesterfield (Mr. Benson) for the tidiness of his mind. But on this occasion, I think his remarks are very untidy indeed. As I understood him, his argument was that in the case of a company

which, for instance, started with a nominal capital of a million pounds and assets equal to that amount, if half the capital were lost and the company wrote down its nominal capital by £500,000, then, to use his own expression, the company would have reverted to the original position. I do not see that that can be claimed in any sort of fairness or justice or tidiness. By writing down your capital you acknowledge that you have lost half of it. What would, I think, be a reversion to the original position would be if the company, having acquired new strength and ploughed back funds into the industry, was once again able to increase its nominal capital to a million pounds. Then, indeed, you would revert to the original position. It is that transaction which we seek, by this new Clause, to exempt from taxation.
I hope that hon. Members on either side of the Committee will not feel aggrieved if I say that during these Debates on bonus shares there has been a tendency to overstate the case. I think, for example, that there may have been isolated instances where the nominal capital of a company has been increased for the purpose, to some extent, of making the dividend payments apparently at a lower level than they really were. There have been cases where the value of holdings in companies have been increased to some extent by the issue of bonus shares. On the other hand, I thought that the hon. Member for Chippenham (Mr. Eccles) hit the nail completely on the head when he remarked, a day or two ago, that in his view the Chancellor of the Exchequer was entirely wrong in fixing his attention, and asking the Committee to fix its attention, on the actual operation of issuing the bonus shares; the actual moment of the financial operation. Of course, it certainly is that event which will attract taxation if the Chancellor's proposals become law; but there has probably been, prior to any issue of bonus shares, many years of excellent, orthodox, sound and prudent finance when profits—and this should please the Chancellor of the Exchequer—have been ploughed back into the industry. Also, if, on occasions, increasing the nominal value of a company has led to a false impression with regard to the rate of dividend which that company is paying, the reverse is at least equally true, and I think would probably be much more frequent, for unless


the nominal capital of a company can be freely increased and made roughly to correspond to any increase of actual capital—

The Chairman: The hon. and gallant Gentleman is addressing himself to the general question of bonus issues and not applying himself to the new Clause, which really deals with the question of disregarding certain factors. The question of the taxation or otherwise of bonus shares is not in issue.

Colonel Ropner: I was developing an argument with a direct bearing on the new Clause. I know that the arguments which I have been using, have a direct bearing on Clauses 49 and 50 of the Finance Bill, but I think that they are much more applicable to the case which we are asking the Chancellor of the Exchequer to consider in this new Clause. We hope that the Chancellor of the Exchequer, whom we were not able to persuade to give way in the case of the general range of bonus shares, will agree that the general arguments used—and I have tried to outline them again tonight —are more powerful and more worthy of his consideration when applied to companies which have reduced their capital in the past and now desire to increase their capital to the original figure. We do believe that these are special cases and are exceptional, and should be excluded from the provisions of the Bill in accordance with this new Clause.
There were a number of very lean years for a number of companies between the wars, and wise and sound finance prompted executives in these companies to take exactly the opposite procedure to that of issuing bonus shares. They reduced the capital of the companies which they managed. The admission that assets have been lost is a courageous act, and one which must be given very considerable thought before it is embarked upon. In the case of many companies which did lose capital and did write down capital, there has occurred that which the Chancellor of the Exchequer has pleaded for on numerous occasions—namely the ploughing back of profits, a resistance to the temptation to pay dividends, again something for which the Chancellor has pleaded in this House—and after some years of toil, effort, and enterprise, the position has arisen where the capital may

with fairness be restored to the shareholders and be written back to the original amount. Whatever confidence the Chancellor of the Exchequer may have placed in his arguments when resisting arguments from this House on the general question of bonus issues I hope he will not place reliance on them in such cases as these.
There is only one other consideration I would ask the Chancellor of the Exchequer to note when dealing with this proposed new Clause. I remember the Chancellor of the Exchequer, in a speech a year or more ago, talked about incentives to enterprise and of initiative and hard work in trade and industry. He decried the profit motive. He did not think much of it, although the time will come when even he will be convinced that it is an extremely powerful force in trade and industry whether among the executive, wage earners, or anyone else. I remember he said that one of the incentives afforded in trade and industry was the pride that executives take in running a successful show. I think he was right and that perhaps that plays a bigger part in encouraging industry than most people are prepared to admit. I speak feelingly on this because, as I have already told him, know a company which is concerned in this matter and believes that this consideration is of real importance.
However small the element of blame may be in managing a company which has had to reduce its capital—I think there have been many occasions when there has been no room for blame at all—the Chancellor of the Exchequer will agree that those who have to sponsor a proposal to reduce capital do feel that there is an element of shame. It is a rather shaming thing for a company to have to do. Companies such as that are even compelled to have a little "reduced" in brackets after their title to indicate to the world that capital has been lost by the shareholders. I can assure the right hon. Gentleman that in cases like that, those who manage companies look forward to the time, and work for the time, when they can restore the original capital. However little truth there may be in the assertion that in issuing bonus shares the shareholders gain something, a firm with a history in which it takes a pride, feels its existence is once again justified if it can restore the original nominal value of


its shares and gets rid of the "reduced" even if the word has already disappeared from the notepaper. It is for that reason that I asked the right hon. Gentleman to consider with sympathy the suggestion that companies which have had to reduce their capital but which are now in a position to restore it may do so without attracting tax.

The Solicitor-General: I am sorry that we cannot accept this new Clause. We have listened very carefully to the arguments which have been adduced in support of it, and we considered it very carefully when it was put on the Order Paper. What is the position? The Clause does not really raise the question of the rightness or wrongness of the tax. It is a tax on a single transaction on the issue of bonus shares, the making of a bonus issue. The question that arises is whether logically one can relate that tax and the charge to be made under it to some accident in the history of the company which may have taken place years before. There may have been a writing down which took place a long time back in the company's history, and it is said that because of that writing down, when there is a subsequent bonus issue made by the company, there should be a scaling down of tax.
11.45 p.m.
What is the position when the capital of a company is written down because a certain part of the assets have been lost? Really these assets have gone irretrievably. It is not as if the assets are regained by the company or for the company. Assets which have gone are gone for good. What happens in the company's history may be this. By earning profits with the remaining part of the capital which has not been lost and capitalising reserves made by the use of the remaining capital—the remaining capital assets —a company gets in a position where it feels it should make a bonus issue. As pointed out, it is free to make or not to make such an issue. It is a voluntary transaction and the tax is a tax which impinges on the transaction as a transaction. It is not a tax on reserves nor is it related to reserves. It is a tax on a single transaction which the company is free to enter into or not to enter into. We feel that in these circumstances it is really logical to say that we should not

relate a tax on a transaction to what may have been far back in the company's history.
Shareholders who acquire bonus shares may or may not be the same shareholders who suffered loss when the capital of the company was written down. If a long time intervened between the two transactions, it may very well be that the shareholders will be entirely different. Therefore, we feel that we must, in order—to borrow a phrase used by the hon. Member for Chesterfield (Mr. Benson) in relation to his way of thinking—to keep the earlier decision tidy—adhere to the decision that the tax is a tax on nothing but a particular decision. When there is a bonus transaction, this demand for a scaling up or down is wholly and utterly irrelevant to the incidents which gave rise to the bonus issue. When the capital has gone and has led to the writing down of the company's capital, it has gone for good and all, and the profits which led to the issue of the bonus shares at the later stage relate to later profits which are made with the assets which remain and which cannot in any sense be related to the assets which have gone and gone for good.

Mr. Assheton: I have not more than one point I wish to raise because, for one thing, I am tired talking about bonus shares in the middle of the night. The hon. Member for Flint (Mr. Birch) put this case very well and he was very well followed by the hon. and gallant Member for Barkston Ash (Colonel Ropner), I do not think the Solicitor-General really answered the main point. He has told the Committee that reasons of logic prevent the Chancellor of the Exchequer accepting the new Clause. There will be a considerable sense of grievance if the new Clause is not accepted—a very legitimate grievance. A company which has worked its way back to prosperity will feel it is not being treated fairly or given a fair deal when the happy day is reached for it suffers a heavy tax at the hands of the Chancellor. The hon. Member for Chesterfield has said it would not be tidy. You cannot make a rubbish heap tidy, and the bonus tax is about the biggest rubbish heap ever seen in this House. For that reason we propose to divide.

Question put, "That the Clause be read a Second time."

The Committee divided: Ayes. 53; Noes, 182.

Division No. 258.
AYES.
[11.52 p.m.


Assheton, Rt. Hon. R
Gage, C.
Pitman, I. J.


Barlow, Sir J
Hannon, Sir P. (Moseley)
Ramsay, Major S.


Baxter, A. B
Hollis, M. C.
Robinson, Wing-Comdr Roland


Birch, Nigel
Hope, Lord J.
Stanley, Rt. Hon O.


Bossom, A. C.
Howard, Hon. A.
Stoddart-Scott, Col. M.


Bower, N.
Hutchison, Col. J. R. (Glasgow, C.)
Stuart, Rt. Hon. J. (Moray)


Braithwaite, Lt.-Comdr. J. G
Law, Rt. Hon. R. K
Sutcliffe, H.


Buchan-Hepburn, P. G T
Lucas-Tooth, Sir H.
Thomas, J. P. L. (Hereford)


Carson, E
Maclay, Hon. J. S.
Thorneycroft, G. E. P. (Monmouth)


Clarke, Col. R. S.
Macpherson, N. (Dumfries)
Thorp, Lt.-Col. R. A. F.


Clifton-Brown, Lt.-Col. G.
Manningham-Buller, R E
Ward, Hon. G. R


Crookshank, Capt. Rt. Hon. H F, O.
Marples, A. E.
Wheatley, Colonel M. J.


Crosthwaite-Eyre, Col. O. E.
Marshall, D. (Bodmin)
Williams, C. (Torquay)


Darling, Sir W. Y.
Mellor, Sir J.
Williams, Gerald (Tonbridge)


Digby, S. W.
Morrison, Maj. J. G (Salisbury)
Willoughby do Eresby, Lord


Drayson, G. B.
Neven-Spence, Sir B



Drewe, C
Nicholson, G.
TELLERS FOR THE AVES:


Fraser, H C P. (Stone)
Noble, Comdr. A H. P
Mr. Studholme and Major Consult


Fraser, Sir I (Lonsdale)
Orr-Ewing, I. L.





NOES.


Adams, W. T. (Hammersmith, South)
Gibbins, J.
Popplewell, E


Alexander, Rt. Hon. A. V.
Gibson, C. W.
Porter, E. (Warrington)


Allen, A. C. (Bosworth)
Glanville, J. E. (Consett)
Price, M. Philips


Attewell, H. C.
Greenwood, A. W. J. (Heywood)
Pritt, D. N.


Awbery, S. S.
Grey, C. F.
Proctor, W. T.


Bacon, Miss A.
Grierson, E
Pryde, D. J


Baird, J.
Griffiths, D. (Rother Valley)
Randall, H. E


Barton, C.
Haire, John E. (Wycombe)
Ranger, [...]


Bechervaise, A E
Hale, Leslie
Rankin, J.


Benson, G.
Hall, W. G.
Reid T. (Swindon)


Bing, G. H. C.
Hamilton, Lieut.-Col. R.
Richards, R.


Blenkinsop, A.
Hannan, W. (Maryhill)
Robens, A.


Blyton, W. R.
Hastings, Dr Somerville
Roberts, Emrys (Merioneth)


Bowden. Flg.-Offr. H. W.
Henderson, A. (Kingswinford)
Rogers, G. H. R.


Braddock, Mrs. E. M. (L'pl. Exch'ge)
Herbison, Miss M.
Royle, C.


Braddock, T. (Mitcham)
Hobson, C. R.
Sargood, R.


Brook, D. (Halifax)
Holman, P.
Scollan, T.


Brooks, T J. (Rothwell)
House, G.
Shackleton, E. A. A


Brown, George (Belper)
Hoy, J.
Sharp, Granville


Brown, T J (Ince)
Hutchinson, H. L. (Rusholme)
Shawcross, C. N. (Widnes)


Bruce, Maj. D. W. T
Irving, W. J.
Shawcross, Rt. Hn. Sir H. (St. Helens)


Burke, W. A.
Janner, B.
Simmons, C. J.


Butler, H. W. (Hackney, S.)
Jeger, G. (Winchester)
Skeffington, A. M


Byers, Frank
Jeger, Dr. S. W. (St. Pancras, S.E.)
Smith, C. (Colchester)


Callaghan, James
Jones, D. T. (Hartlepools)
Snow, Capt. J. W


Champion, A. J
Jones, Elwyn (Plaistow)
Solley, L. J.


Cobb, F. A.
Jones, P. Asterley (Hitchin)
Soskice, Maj. Sir F.


Coldrick, W.
Keenan, W.
Sparks, J. A.


Collindridge, F
Kenyon, C.
Stamford, W.


Collins, V. J.
Kirby, B. V
Steele, T.


Colman, Miss G. M
Lang, G.
Swingler, S.


Comyns, Dr. L.
Levy, B. W
Sylvester, G. O


Cooper, Wing-Comdr, G.
Lewis, A. W. J. (Upton)
Symonds, A. L.


Corbel, Mrs. F. K, (Camb'well, N.W)
Longden, F.
Taylor, H. B. (Mansfield)


Corlett, Dr. J.
Mackay, R. W G (Hull, N.W.)
Taylor, R. J. (Morpeth)


Corvedale, Viscount
McLeavy, F
Taylor, Dr. S. (Barnet)


Crawley, A.
Macpherson, T. (Romford)
Thomas, D. E. (Aberdare)


Crossman, R. H. S.
Mallalieu, J P. W
Thomas, Ivor (Keighley)


Dalton, Rt. Hon. H.
Manning, Mrs. L. (Epping)
Thomas, I. O. (Wrekin)


Davies, Edward (Burslem)
Mikardo, Ian
Thomas, George (Cardiff)


Davies, Harold (Leek)
Mitchison, G. R
Thorneycroft, Harry (Clayton)


Deer, G.
Monslow, W
Ungoed-Thomas, L.


Diamond, J.
Morley, R.
Wadsworth, G.


Dobbie, W.
Morris, P (Swansea, W.)
Walkden, E.


Driberg, T. E. N.
Moyle, A.
Weitzman, D.


Dugdale, J. (W. Bromwich)
Murray, J. D.
Wells, W. T. (Walsall)


Dumpleton, C, W
Neal, H. (Claycross)
West, D. G.


Dye, S.
Nichol, Mrs. M. E. (Bradford, N.)
White, H. (Derbyshire, N.E.)


Ede, Rt. Hon. J. C.
Nicholls, H. R. (Stratford)
Whiteley, Rt Hon W.


Edwards, W. J. (Whitechapel)
Noel-Baker, Capt. F. E. (Brentford)
Wigg, Col. G. E


Evans, John (Ogmore)
Oliver, G. H
Wilkins, W. A.


Evans, S. N. (Wednesbury)
Orbach, M.
Williams, D. J. (Neath)


Ewart, R.
Paget, R. T
Williams, J. (Kelvingrove)


Farthing, W J.
Paling, Will T. (Dewsbury)
Williams, W. R. (Heston)


Fernyhough, E.
Palmer, A. M. F.
Willis, E.


Field, Capt. W. J.
Pargiler, G. A
Wyatt, W.


Fletcher, E. G. M (Islington, E.)
Parker, J.
Yates, V. F.


Fool, M M.
Paton, J. (Norwich)
Zilliacus, K.


Forman, J. C.
Pearson, A.



Fraser, T. (Hamilton)
Peart, Thomas F.
TELLERS FOR THE NOES:


Gaitskell, H. T. N
Piratin, P
Mr. Joseph Henderson and


Ganley, Mrs. C. S
Platts-Mills. J F F
Mr. Michael Stewart.


Question put, and agreed to.

NEW CLAUSE.—(Application of section eleven of Finance (No. 2) Act, 1939.)

Section eleven of the Finance (No. 2) Act, 1939 (which grants relief in respect of diminution of earned income owing to circumstances directly or indirectly connected with the war) shall apply in relation to tax for the year 1947–48 as it applied in relation to tax for the year 1939–40 with the adaptation that references to the year 1939–40 shall be construed as references to the year 1947–48 and references to the year 1938–39 shall be construed as references to the year 1946–47.—[Lieut.-Commander Braithwaite.]

Brought up, and read the First time.

Lieut.-Commander Braithwaite: I beg to move, "That the Clause be read a Second time."
This new Clause rests on a brief history. In the financial year 1939–40 relief was granted to an individual who was taxed on his earned income for the preceding year if his actual income for that year was not more than four-fifths of his earned income in the preceding financial year. This was a reduction of his assessment down to the actual income of 1939–40, and it was, of course, a condition of relief that the fall in his income was due to circumstances which could be shown to be directly or indirectly due to or connected with the war. The concession made at that time has been extended up to 1946–47, although the end of that financial year brought us to a time two years from the end of hostilities. It is not extended by the present Finance Bill to the current year 1947–48, with which we are now dealing.
12 m.
This new Clause seeks to make that extension and the reason which we adduce is quite simple. It is true that the war and the crisis connected with it are ended, but there fell upon us this spring a trade crisis of the greatest severity owing to the fuel cuts and the severe weather which we experienced in the early months of the year: The Opposition is anxious to make this a non-controversial atmosphere, to retain our equipoise: so we are not blaming the Government for the weather in this connection, nor the weather for the Government. All we seek to emphasise is that the circumstances in the early months of 1947 have caused a most grievous loss of income in many trades and businesses, and we think that the principle which underlay the emergency wartime regulations should equally apply

to the financial year 1948. The relief does not apply to corporate bodies and employees, but mainly to sole traders, partners and farmers. The right hon. Gentleman will see at once the importance of farmers being brought within the purview of this Clause. We discussed this under another Measure and we shall be discussing it on Friday, but it is important that farmers should be brought in. We therefore suggest that it be continued to the end of the present financial year.

Mr. Glenvil Hall: The hon. and gallant Member for Holderness (Lieut.-Commander Braithwaite) was quite correct in his reference to the origin of this concession. It gave relief in the Finance (No. 2) Act of 1939 to individuals who, because of circumstances arising out of the war, found their income had diminished. The classic case was the man who had been in a good job or good way of business and found himself in the Army on a private's pay and had to pay Income Tax in that year on the assessment for his income in 1938–39. Obviously things could not remain like that and the enactment to which the hon. and gallant Gentleman referred was instituted, very properly so. Year after year that concession has been carried forward until last year it was thought by my right hon Friend, and I think very properly, that two years after the war this concession must now come to an end. The hon. and gallant Gentleman based his desire to continue it not because the circumstances connected with the war were still continuing, but on the very hard weather we had earlier this year and the flooding which resulted from it.

Lieut.-Commander Braithwaite: And the fuel crisis.

Mr. Glenvil Hall: And the fuel crisis. When the hon. and gallant Gentleman began to deploy that argument I looked again at the new Clause he was moving, and I found that references to continuing the Act are not to make it applicable to circumstances arising out of floods and blizzards and the fuel crisis, but to anchor it, as on former occasions, to circumstances arising out of the war. The Inland Revenue must obey the law, and if this enactment were sent forward to another year, they would have to assign this one-fifth concession, not to what happened earlier this year, but to circumstances aris-


ing out of the war. It would have been very difficult to do that. The help that the hon. and gallant Gentleman desires to give to those who are assessed under Schedule D would therefore I am afraid, not assist a good many people whom it is his desire to assist.
I would remind the Committee that, now that P.A.Y.E. has been introduced, the only people who could in any circumstances be helped are the people who are assessed under Schedule D. That, in turn, arises out of circumstances affected by the war, and even with Schedule D Income taxpayers, I imagine there can be very few who have suffered a fall in income, and who would not approach the Inland Revenue with a plea for this concession, supposing my right hon. Friend agreed to it. Quite obviously, this concession has to come to an end some time. It is unsuitable to carry a wartime and rather illogical provision of this sort too far forward into peace. We have carried it forward two years, and we think that that is long enough. If an individual has the right to go to the Revenue and demand the better of two years' assessments, surely the Revenue, on its side, would be equally entitled to go to an individual and say, "If you desire to take what you think is the best assessment this year, another time, surely, we have the right to choose between two years, too." The whole thing would become, in my view, rather a muddle. Therefore, I hope the Committee will reject this new Clause. We are sympathetic, of course; and the action of the Government shows that we sympathise with those who suffered earlier

NEW CLAUSE —(Revised rates of Entertainment Duty.)

As respects payments for admission to entertainments held on or after the first day of August, nineteen hundred and forty-seven, the following rates of Entertainment Duty shall be substituted for those set out in Part II of the Fifth Schedule to the Finance Act, 1943.—

Amount of payment.
Rate of duty.


Where the amount of payment excluding the amount of duty—



s.
d.

s.
d.





s.
d.


Exceeds
0
3
and does not exceed
0
5
…
…
…
…
…
0
0½


Exceeds
0
3
and does not exced
0
6¼
…
…
…
…
…
0
0¾


Exceeds
0
6¼
and does not exceed
0
7
…
…
…
…
…
0
1


Exceeds
0
7
and does not exceed
0
8
…
…
…
…
…
0
1


Exceeds
0
8
and does not exceed
0
9
…
…
…
…
…
0
1


Exceeds
0
9
and does not exceed
1
0
…
…
…
…
…
0
1½


Exceeds
1
0
and does not exceed
1
0
…
…
…
…
…
0
2


Exceeds
1
3
and does not exceed
0
6
…
…
…
…
…
0
3


Exceeds
1
6
and does not exceed
1
9
…
…
…
…
…
0
6


—[Mr. N. Maclean.]

Brought up, and read the First time.

this year as a result of the floods and the crisis that came upon this country. But our view is that further help of this kind cannot be given because it would not help those who need it, and because this thing has to come to an end some time We think that that time is now.

Lieut.-Commander Braithwaite: Naturally we are disappointed with the right hon. Gentleman's reply; but as the Committee have had a long day, and as it is advisable, I think, that we should be in a position to start tomorrow on a more important matter, we do not intend to put the Committee to the trouble and time of a Division. But I would just say this. I think the right hon. Gentleman should have had some consultation with his right hon. colleague the Minister of Fuel and Power before he delivered his reply; because when we were in the fuel crisis the Minister was at great pains to impress upon us that it was entirely due to the war. We are now seeking to expend the concession that the Government told us was one of the consequences of the war. The right hon. Gentleman the Financial1 Secretary has discarded that, for the time being. We shall not be unmindful' of that when his colleague appears on one of his black Fridays at the Despatch Box. However, if I may use a phrase we so often hear from the Chancellor, we intend to look at this again, and hope to put something down on Report stage that may be more acceptable to the Government. I beg to ask leave to withdraw the new Clause.

Motion and Clause, by leave, withdrawn.

Mr. C. Williams: I beg to move, "That the Clause be read a Second time."
I do this as none of the hon. Members in whose name the new Clause stands is here. I should like to move it formally for one purpose: because it does represent a concession to the people with the lowest incomes. We may not have another chance to discuss this matter I do not associate myself necessarily with the figures in the last column. But I do feel that, if there is the least chance in the world of getting this concession on the Entertainment Duty, it would be a pity if no one in this Committee dared to move it. A large number of my constituents and a large number of the constituents of other hon. Members would like to see this effort of the three Scottish Members in whose names it stands materialise. I do not think the Chancellor should be denied the opportunity to give this concession, and for that reason I move this new Clause very shortly and in a spirit of helpfulness. The hon. Members whose names we see on the Order Paper are not here to use their eloquence; I have neither their eloquence nor their powers of persuasion, but I move the Clause in the hope that the Chancellor will see fit to grant our wishes.

Mr. Dalton: The hon. Member does not wish to delay matters, and to speed up the business I would say quite briefly that this Clause, if accepted, would cost between £30,000,000 and £40,000,000 a year. That is sufficient reason for me to say quite shortly that I cannot accept it.

Mr. Williams: I was ready to corn-promise, but in order that business may be speeded up, I will not proceed. I hope there will be no sudden uprising of hon. Members opposite supporting this new Clause. I think it is a good one but having performed a useful job in speaking for a very large number of poor people, I cannot do more. [Interruption.] I am sorry that hon. Member opposite only jeer at the poor people. I shall remember that. I beg to ask leave to withdraw the Motion.

Motion and Clause, by leave, withdrawn.

To report Progress; and ask leave to sit again.—[Mr. Michael Stewart.]

Committee report Progress; to sit again this day.

BRITISH FIRMS, BORNEO (TAXATION)

Motion made, and Question proposed, "That this House do now adjourn."—[Mr. Michael Stewart.]

12.13 a.m.

Colonel J. R. H. Hutchison: I make no apology, even at this late hour, for raising a question of deep and fundamental principles. It is, in effect, the conditions in which growers of rubber in British North Borneo are at the present time treated. The action of His Majesty's Government appears to indicate that their conscience has become as resilient and elastic as the produce which is the subject of my remarks tonight. To enable the House to follow the problems to which this matter has given rise, it is necessary to go back a little into history. In 1905, the Charter Company of North Borneo, in order to help British companies to pioneer in the growing of rubber, offered certain facilities which were published in the "Official Gazette" of December, 1905. Those concessions and facilities included two of fundamental importance, and it is only with those that I am concerned tonight. The concessions were that for a period of 50 years from 1905—and I hope the House will note that period with care—those who applied to have these concessions would be granted the facility of being free of quit rent and free of any export duty on the rubber which they so produced. It was under those concessions that some of my constituents, along with 20 or 30 other concerns, took advantage of the situation and my constituents—the Tenom Rubber Estates, Ltd.—formed themselves into a company. It is from them also that I have obtained the information and details which I will briefly lay before the House. The situation that then obtained was they pioneered the growing of rubber in British North Borneo.
The concession, and the terms of the concession, were respected until the war. As is well known, the Island of North Borneo, in common with a great many other parts of the world, fell into the hands of the enemy, and it was only at a considerably later stage of the war, when the British Military Government were able t3 take over control of the Island, that they proceeded to impose a tax of 4 cents per pound upon all rubber grown in British North Borneo. My constituents,


and the other concessionaires, claim that this is a direct and violent breach of the contract which they had enjoyed and under which they had up till then laboured. The next stage in the history of this affair came when, in 1946, His Majesty's Government took over from the Charter Company of North Borneo, and proceeded to occupy the position which the Charter Company up till then had occupied. When they took over the Charter Company, they drafted an agreement, and in one of the clauses of the agreement, the Government agreed as follows:
The Crown shall discharge all obligations incurred by the Company, including all obligations and liabilities under, or in respect of, all grants, concessions, leases, and other rights or interests subject to, and with the benefit of which the Borneo assets are, by Clause 2, hereof expressed to have vested in the Crown.
There can be no doubt, in any reasonably-minded man's conception of things, that they did, in fact, give a pledge to these concessionaires that His Majesty's Government would carry on the facilities and the rights which they had been granted in 1905 by the Charter Company of North Borneo. My constituents, and the other concessionaires so affected, contend that the Government have acted in breach of these agreements and that they are entitled, from the time the export duty was levied, to a refund of the 4 cents per pound with which they have been taxed.
This case has been the subject of consideration by His Majesty's Government for some considerable time—for about nine months—and representations have been made, not only locally in the Island to the Governor, but also in London, through the Rubber Growers' Association, to the Colonial Office; and in January of this year, a deputation from the Rubber Growers' Association was received by the Colonial Office, and the matter was thoroughly discussed. The Colonial Office explained to the deputation that it would have been in the power and the right of the Chartered Company of North Borneo, as it was, indeed, in the right of His Majesty's Government today, to have introduced legislation annulling that concession and varying its terms, but they graciously said, at the time, that they, did not propose to act on those powers. I should think not, because if they had, in fact, used them, they would have been in breach of the greatest possible moral

obligation that one can imagine. Of course, it is always possible for a Government to alter, by legislation, promises which it has given; but I am glad that the Colonial Office does not, in fact, intend to use its powers in that way, because to do so would tend to undermine confidence not only among people who have been given a solemn pledge, but among people in a much wider area of the British Dominions.
Our constituents, and indeed all those who are growing rubber in North Borneo, complain that in any case this 4 cents a pound export duty is far too high. They point out that it is a remote area in which they work, that this necessitates long sea transport, and that these facts together, in addition to the 4 cents a pound export duty, make, or are beginning to make, the growing of rubber in North Borneo unprofitable. They declare also that already some of the smaller concerns are finding it impossible to continue because of this inordinately high levy. They point to Malaya, where rubber is grown in large quantities, and which also sought to introduce this four cents a pound export duty, but in fact reduced it by a series of stages to 2¾ cents a pound, and later to 2.4 cents a pound. I admit, in fairness, that certain other taxation was introduced concurrently with the reduction of the export duty.
These producers in Borneo have been informed by the Colonial Office that the devastation which has been suffered in that island owing to the war forces the Colonial Office to find other sources, or increased sources, of revenue over those which were required in the past. The growers recognise that necessity, but they say that before an arbitrary breach of a previous agreement of this kind was sought to be brought into operation, they should have been consulted. They still want consultation. They contend that it may be possible to find other methods of taxation which will increase the revenue, but they say that this taxation should fall on an industry able to bear it, and that a flat rate of export duty may kill an industry. They claim also that this new method of taxation should fall upon those who are prosperous; but whether it should take the form of a profits tax or income tax must be determined. They point out that they are not able to draw compensation from War compensation schemes and Acts, such as play


their part in other countries. They contend, further, that in any case, whatever system of taxation is devised, they should enjoy this original concession, and should be in a relatively privileged position compared with the other rubber growers in the same island.
I understand that that attitude has been resisted but there is a certain amount of logic and fairness in it, because it is the pioneers who developed the industry who suffered in the past, and those who came later may well have reaped the benefit of picking the brains of those who preceded them. I do not think it is illogical or unfair for the pioneers to contend that they had to bear the burden and heat of the day in 1905 and earlier years, and are entitled to have that taken into consideration. There is a deep matter of principle here. There are only eight years of this concession to run. Surely, His Majesty's Government are not going to break faith with those people who have been relying on this concession.
Eyes are turned from the Dominions and Colonies to see how far the British Government are going to carry on and honour a pledge given by a Charter Company which it has taken over. Therefore I urge the Colonial Office once again to continue with the consultations which I know are taking place, but are dragging on interminably. They have dragged on for nine months and already the position is serious for all rubber growers, and desperate for the small people. The Government must be jealous of their good name and their reputation. The British Government's name and reputation have hitherto stood high in our Colonies and Dominions. I urge them to bear that in mind and to accept and follow the noble principle of the past, and not to let it be said that the Mother of Parliaments has turned itself into a common pickpocket. Let them make the distinction between mothering and smothering their Colonies.

12.26 a.m.

Sir John Barlow: I should like to add a word on this matter, but before doing so, I would like to declare my interest in that I am a director of a plantation company in British North Borneo, and I have certain personal experiences of that country, as I visited it before the war. The hon. and gallant

Member for Central Glasgow (Colonel Hutchison) has put extraordinarily well the feeling of injustice now experienced by plantation companies which enjoyed the advantages of a long time of pioneering in British North Borneo. I will read very briefly two very important clauses in the original agreements between the British North Borneo Charter Company and the plantation companies. Clause 4 says:
The Charter Company shall not charge any export duty on cultivated rubber from the said land during a period of 50 years from the date of registration of the rubber company.
That is clear enough, and one would have thought there was no doubt about it in any way.
Clause 14 reads:
If there should be any variation or inconsistency between the provisions of this agreement and the said land regulations, the provisions of this agreement shall prevail.
One would have thought that was plain and explicit enough and that there was no shadow of doubt about the interpretation. For those reasons, those companies in British North Borneo, who find it much more difficult to produce rubber than do companies in Malaya and other parts of the world, find this a very difficult pill to swallow, and there is a good deal of feeling about it. I hope we shall be told this will be settled in a satisfactory way in the very near future.
While talking about this matter, there are other matters which I would like to mention. During the occupation of that part of Borneo by the Japanese, obviously the bank balances of any firms in that country were frozen. Immediately the Japanese left the island, the Colonial Office took control and for a very long period these bank balances remained frozen. The question has been raised in this House and we have been told that the matter was being considered periodically. The freezing of those bank balances caused very serious embarrassment to many companies in that many were poor and could not afford to have all their liquid capital, as was the case in many of the companies, frozen for a long period.
There has been issued by the Colonial Office during the last month a statement saying that the Colonial Office does not intend to carry on the banking system as formerly was done by the British North


Borneo Charter Company, and that one of the banks is going to take over the business and has invited representations to be made by people interested. That does not completely settle the matter. It is now nearly two years since the evacuation of the island by the Japanese, and it seems to me that that is far too long, and one has a right to expect the Colonial Office to move far more quickly in such a matter in order to assist industry onto its feet again. I could give instances of serious embarrassment in this matter.
One other matter I would like to mention is the way in which the Colonial Office, apparently, are taking over the assets of the Charter Company. It became known nearly two years ago that the Colonial Office intended to take over this territory. A Question was asked in this House, on 22nd August, 1945, as to whether there was to be any modification in the system of government in the State of North Borneo on liberation from the Japanese. The Colonial Secretary at that time replied: "Yes," and stated that discussions were already taking place. It is unfortunate that nothing definite has been issued so far, but it is possible that the statement that was made as far back as August, 1945, was rather premature, as at that time the value of the Charter Company's shares suddenly rose without any apparent reason. The price of the shares in 1944 varied between 5s. 6d. and 8s. 7d. In May, 1945, they stood at 9s. 3d. In August of that year, for no apparent reason, they suddenly went up to 18s. 3d. and in August, as I have pointed out, this statement was made by the Government. As far as I know, there has been no finality about those arrangements, and I hope the Minister will give some information on that point.

12.32 a.m.

The Under-Secretary of State for the Colonies (Mr. Ivor Thomas): I did not come prepared to deal with the points raised by the hon. Gentleman the Member for Eddisbury (Sir J. Barlow) and I was not aware that they would be raised, but, as he has raised the question of compensation to be paid to the Charter Company, I will reply briefly that this is provided for in the terms of the agreement. I hope that within a few months the case can go to the arbitrator, Lord Uthwatt, as is provided for in the agreement. There is a great deal of correspondence between

solicitors to be dealt with before the case can come up for determination.
The hon. and gallant Member for Central Glasgow (Colonel Hutchison) made his case with studious moderation, and I have no cause to complain of his presentation of it. He made two points. He objected, first, to the existence of the export tax on rubber, and, secondly, he urged that even if there was to be such a tax, it was too high. With regard to the imposition of the export tax on rubber, it is the case, as he said, that in 1905 the Charter Company, in order to induce planters to develop the cultivation of rubber, offered concessions with the promise that there would be no export tax on rubber for 50 years. That is a very long period indeed, and I believe the Charter Company itself, at a later period, found it rather onerous. There can be no doubt, however, about the legal position. I do not think it is disputed by the hon. and gallant Gentleman. It is firmly established in law, I am advised, that a sovereign body such as the Charter Company, or such as His Majesty's Government, cannot by a particular enactment restrict its sovereign power. It would, therefore, be inherent in the sovereignty of the Charter Company and its successor, His Majesty's Government, to undo this concession, but as the hon. and gallant Gentleman stated, we are not relying upon these legal powers.
He argued that in the transfer of the sovereign powers and assets of the Charter Company to His Majesty's Government, there is a moral obligation to fulfil this undertaking, onerous though it may be. If we talk about morals, there are two sides to the matter. The revenue of North Borneo has to be found from some sources, and the rubber industry must make its contribution to the revenues of the Colony. The present position is that in the current year the estimated expenditure of the Colony is £1,070,000 and the estimated revenue is £590,000, leaving about half a million pounds which must be found by grant-in-aid. Of that revenue of £590,000, no less than £187,000 is estimated to come from the export tax on rubber. It will, therefore, be seen that it will not be easy to forego such a tax. If it were to be foregone, it would be necessary to find some other source of revenue.
The hon. and gallant Gentleman, in his second point, urged that the tax was too


high, and he made a comparison with Malaya. He pointed out that when the export tax on rubber was reduced in Malaya, other sources of taxation were found—in this case, a tax of other primary products. Although Malaya has been very seriously ravaged by war and its finances are bound to give much anxiety to the Government, North Borneo has been even more ravaged, and its finances give even greater anxiety. So much, then, for the argument that the tax is too high.
These matters have been the subject of negotiations, as the hon. and gallant Gentleman indicated, for some period. These negotiations are still going on with the Rubber Growers' Association, and the Association are content with the progress of the negotiations, and have not complained. They have asked for a further interview with the Colonial Office. It was necessary to collect additional information and to examine the implications of that information before it was worth while to invite the Rubber Growers' Association for a further interview, but such an interview has certainly not been ruled out. I trust the hon. and gallant Gentleman, having raised a matter which, as he said, raises questions of principle of great importance, will now be prepared to leave it for discussion between the Rubber Growers' Association and the Colonial Office. There are two points with which I should like

to close the Debate. The first is that His Majesty's Government will, of course, honour their obligations, legal and moral. There need be no question on that score. The second is that the rubber industry in North Borneo, as one of the most substantial industries of the country, must make its proper contribution to the revenues of the territory. I should hesitate to accept the hon. and gallant Gentleman's proposition that it is entitled to a privileged position in virtue of the agreements of 1905. Whatever force they may have, it is unlikely to be the case that the people who planted rubber in 1905 are those who would benefit from the concession today. But he may be assured that this matter will be very carefully examined and, if it is shown that His Majesty's Government have obligations, they will be honoured.

Colonel Hutchison: Before the Under-Secretary concludes may I raise one point? He has spoken of the necessity of making Borneo pay for itself. We have listened to plans for the expenditure of large sums of money on groundnut schemes. Surely, we would be wise—

Mr. Speaker: The hon. and gallant Gentleman is making a second speech. He has only the right now to ask questions.

Adjourned accordingly at Eighteen Minutes to One o'Clock.